On Monday, the USD/CHF took a U-turn, relinquishing its earlier gains and slipping into negative territory around the 0.8870 level. Notable economic releases were absent for the day, but several Federal Reserve (Fed) representatives delivered speeches.

Investors continue to assess the Nonfarm Payrolls (NFPs) report from the previous Friday, which presented a mixed picture, while eagerly anticipating the upcoming inflation data set to be released on Wednesday.

Mixed US NFPs Raise Eyebrows, Focus Shifts to CPI Data
The US Bureau of Labor Statistics disclosed on Friday that the number of new jobs created in non-agricultural sectors decreased to 209,000 on a month-on-month basis in June, slightly lower than market expectations of 225,000 and down from the previous reading of 306,000.

However, wages experienced a 0.4% monthly increase in the same month, surpassing the projected growth of 0.4%.

This weaker-than-expected job creation figure resulted in significant selling pressure on the US dollar as investors began to anticipate a less aggressive stance from the Fed. However, persistent wage inflation could compel the Fed to maintain its assertive approach and mitigate potential losses for the USD.

Additionally, the forthcoming Consumer Price Index (CPI) data will offer further insights into the inflation outlook for the US. Currently, market forecasts anticipate a decline in the headline figure to 3.1% year-on-year for June, with the Core figure expected to decrease from 4% to 5% compared to its previous levels of 5.3%.

Market Expectations and Fed Remarks
Regarding market expectations, a 25-basis-point hike in the upcoming July meeting has already been factored in, while the likelihood of another increase hovers around 40%.

On Monday, Fed officials Loretta Mester and Mary Daly expressed a hawkish sentiment during their public statements, highlighting that the level of inflation is unacceptably high and further rate hikes would be appropriate. However, their remarks failed to bolster the strength of the USD.


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