The USD/CHF pair is experiencing continued selling pressure, reaching its lowest point since January 2021 in the early European session.

However, there has been a minor recovery in spot prices over the past hour, with the pair currently trading around the 0.8780-0.8785 range. Despite this, the pair remains down by only 0.10% for the day.

The ongoing decline in the US Dollar (USD) over the past week, leading to a two-month low, continues due to speculations surrounding the Federal Reserve’s (Fed) monetary policy tightening. Market participants are increasingly convinced that the US central bank will conclude its rate-hiking cycle after the expected lift-off in July.

This sentiment is reinforced by the downward movement of US Treasury bond yields. Consequently, the USD is under pressure, contributing to the downward trend of the USD/CHF pair.

Last week, the highly anticipated US employment report revealed the addition of the fewest jobs in 2-1/2 years in June, indicating a cooling labor market. Moreover, the monthly survey by the New York Fed unveiled a drop in one-year consumer inflation expectations to 3.8% in June, the lowest level since April 2021.

These developments fuel speculations of further deceleration in US consumer inflation, suggesting that the US central bank may adopt a less hawkish stance sooner rather than later.

As a result, market attention is focused on the upcoming release of the latest US consumer inflation figures during the early North American session. Prior to this key data, there has been a modest recovery in global risk sentiment, as evidenced by a generally positive tone in equity markets.

This has diminished the appeal of the safe-haven Swiss Franc (CHF) and helped mitigate losses for the USD/CHF pair, at least temporarily. Nevertheless, the fundamental backdrop favors bearish traders and indicates that the path of least resistance for spot prices remains downward.


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