Ella 
In early European trading on Tuesday, USD/CHF hit a new intraday high near 0.8855, reversing the decline seen at the beginning of the week. The dollar’s rebound and the poor performance of Switzerland’s GDP in the second quarter of this year announced the day before supported the currency pair’s rebound.
The U.S. dollar index rose slightly to around 104.25, pausing its two-day rise the day before to follow the rise in U.S. bond yields ahead of key U.S. data. The 10-year yield rose 3 basis points to 4.21% after holiday consolidation.
Beyond yields, the dollar’s latest rally may also have something to do with Friday’s generally upbeat U.S. jobs report as well as hawkish talk from the Federal Reserve and news from China challenging market sentiment.
The U.S. non-farm payrolls report revived the Fed’s hawkish tendencies, even if the unemployment rate and average hourly earnings data later caused concerns about a policy shift. Later, global ratings agency Moody’s raised its 2023 GDP growth forecast for the United States to 1.9% from 1.1% in May.
Elsewhere, Cleveland Fed President Loretta J. Mester defended the U.S. central bank’s hawkish moves and ruled out a rate cut in a speech on Friday. Still, market bets on the Federal Reserve (FED) maintaining the status quo in September stand in stark contrast to recent increases in support for a rate hike by the end of 2023.
In addition, the market’s lack of confidence in China’s measures to safeguard the economy, as well as the recent tensions between China and the United States on the Taiwan issue and the discomfort of American companies in Beijing, have stimulated market sentiment and brought support to the dollar.
On the other hand, Switzerland’s second-quarter GDP growth slowed to 0.0% quarter-on-quarter and 0.5% year-on-year, respectively, from the previous values of 0.3% and 1.5%.
All in all, USD/CHF’s gains appear reasonable and may keep buyers on the sidelines. However, today’s U.S. July factory orders and headlines about China, along with concerns from the Fed, will be important to watch for clear direction.
