USD/CHF consolidates its gains near the 0.8700 mark ahead of US PCE inflation data

• USD/CHF consolidates its recent gains near a critical resistance level of 0.8700.
• The upbeat US data broadly boosts the US dollar, acting as a tailwind for the USD/CHF pair.
• The Swiss ZEW Survey Expectations came in at -32.6 versus -30.8 prior and a worse-than-expected 31.1.

The USD/CHF pair recovers its losses and consolidates its gain near 0.8692 during the early Asian session on Friday. The pair gains momentum following the upbeat US economic data released on Thursday. The US Dollar Index (DXY), a measure of the value of the Greenback against six other major currencies, rebounds above 101.70.

The optimistic US GDP growth in the second quarter, robust Durable Goods, and persistently constrained labor market conditions suggest that the Federal Reserve (Fed) could decide to raise additional interest rates. The data released on Thursday reported that the US real Gross Domestic Product (GDP) expanded at a 2.4% annualized rate, above the market consensus of 1.8% by a wide margin and following the 2% growth reported in the first quarter.

Furthermore, Durable Goods Orders rose 4.7% on a monthly basis to $302.5 billion. Initial Jobless Claims declined by 7,000 to 221,000 in the week ending July 22. It is the lowest reading in five months. The upbeat US data broadly boosts the US dollar, acting as a tailwind for the USD/CHF pair.

Federal Reserve (Fed) Chairman Jerome Powell stated that it's possible to raise the Fed funds rate again at the September meeting if the data warrants it. It’s worth noting that the Fed raised interest rates by 25 basis points (bps) to a target range of 5.25%–5.5%, as expected at the July meeting on Wednesday. 

On the Swiss franc front, the Swiss ZEW Survey Expectations data by the Centre for European Economic Research reported that the figure came in at -32.6 versus -30.8 prior and a worse-than-expected 31.1.

Meanwhile, the headline surrounding the US-China relationship remains in focus. On Wednesday, US Treasury Undersecretary Jay Shambaugh stated that the Biden administration would not hesitate to take targeted actions against China to protect human rights and defend the national interests of the US and its allies. However, he added that the two nations must work together to address global challenges, said Reuters. The renewed tension between the world’s two largest economies might cap the upside for USD/CHF and benefit the Swiss Franc, a traditional safe-haven currency.

Moving on, the Swiss Retail Sales for June YoY and the KOF Leading Indicator for July could offer clues about the Swiss Franc movement. Market players will also monitor the Core Personal Consumption Expenditure (PCE) Price Index MoM at 12:00 GMT for fresh impetus. The inflation figure is expected to drop from 4.6% to 4.2% annually. Traders will take cues from this development and find opportunities around the USD/CHF pair.