USD/CHF extends its reversal below 0.8040 with US jobs data on focus

The greenback continues its downward spiral against the Swiss Franc Friday, as markets increasingly bet on Federal Reserve rate cuts. I’ve watched this pair slide to around 0.8035, though it’s still clinging to a modest 0.4% weekly gain despite today’s pressure.

This dollar weakness doesn’t surprise me. The employment data released earlier this week has been consistently disappointing, painting a clear picture of a labor market losing momentum. Today’s Nonfarm Payrolls report will likely confirm what many of us already suspect - the US economy is cooling faster than officials want to admit.

The market consensus expects just 75,000 new jobs in August, barely above July’s anemic 73,000 figure. With numbers this weak, I can’t help but think the Fed is behind the curve.

Fed officials have been increasingly dovish in their commentary, finally catching up to what markets have been signaling for months. The CME Fed Watch tool now shows a staggering 99.4% probability of a quarter-point cut this month - up from 86% just last week. This shift has hammered US yields and sent the dollar tumbling across major pairs.

Meanwhile, Switzerland’s economic data presents its own complications. Thursday’s Consumer Price Index showed yearly inflation stagnating at a mere 0.2%, while monthly figures unexpectedly contracted. These readings practically guarantee that negative interest rates will persist, undermining any serious recovery attempts by the franc.

What’s fascinating is how dramatically market sentiment has shifted. Just weeks ago, many analysts were questioning whether the Fed would cut at all in September. Now it’s essentially a foregone conclusion, with the only question being how aggressive they’ll be in the months ahead.

For traders watching this pair, the path of least resistance appears downward, at least until we see the jobs report. A particularly weak number could accelerate the dollar’s decline, while a surprise to the upside might provide temporary relief - though I doubt it would reverse the overall trend.

The writing is on the wall: the Fed’s tightening cycle is over, and we’re entering a new phase of monetary easing. How quickly they move will determine just how far the dollar falls.