USD/CHF loses momentum above the 0.8750 mark ahead of Swiss Trade data

• USD/CHF loses some ground near 0.8755, up 0.01% on the day.
• Market players anticipate Federal Reserve (Fed) will prolong the tightening cycle.
• The Swiss franc benefits from the risk-aversion amid the fear of an economic slowdown in China.
• Investors await the Swiss Trade data with the key focus on Federal Reserve (Fed) Chair Jerome Powell’s speech on Friday.

The USD/CHF pair loses momentum and holds below the 0.8800 mark in the early Asian session on Tuesday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, struggles to gain and hovers around 103.32.

The prevailing cautious stance is bolstered by the rise of US Treasury bond yields as market players anticipate Federal Reserve (Fed) will prolong the tightening cycle. The US 10-year Treasury bond yield climbs to 4.342% and is close to the highest level of 2007.

Investors raise their bets on additional rate hike by the Federal Reserve (Fed) despite the robust labor data and weaker inflation data. Federal Reserve (Fed) Chairman Jerome Powell Speaks on Friday will be a guide for investors and could provide insights into economic conditions. A hawkish tone might lift the US Dollar (USD) and acts as a tailwind for the USD/CHF pair.

On the other hand, the Swiss franc benefits from the risk-aversion amid the fear of a deteriorating property downturn, sluggish consumer spending, and falling credit growth in China. On Monday, the People’s Bank of China (PBoC) slashed its Loan Prime Rate (LPR) for one year by a smaller margin than anticipated. Chinese central bank decided to cut the one-year Loan Prime Rate (LPR) by 10 basis points (bps) to 3.45% from 3.55% and maintained the five-year LPR unchanged at 4.2%.

The economic recovery in China has lost momentum and put pressure on authorities to release more fiscal stimulus plans. The lack of stimulus measures could boost the CHF against its rivals.

Looking ahead, traders await the Swiss Trade data due later on Tuesday. Also, the US Existing Home Sales, S&P Global PMIs, Initial Jobless Claims, and Durable Good Orders will be released later this week. The key event will be Fed Chair Jerome Powell’s speech on Friday.