• USD/CHF has bounced back from its four-month low of 0.8820, which it hit on Thursday.
• The US Dollar continues to gain ground due to increased risk aversion.
• The Swiss Franc may struggle due to the expectations of the SNB reducing interest rates further.

USD/CHF gains ground for the second successive day, trading around 0.8880 during the European session on Friday. The USD/CHF pair has rebounded from a four-month low at 0.8820 recorded on Thursday. This upside of the pair can be attributed to the strengthening of the US Dollar amid increased risk aversion.

Additionally, The US Dollar is bolstered as US Treasury yields continue to improve. US Dollar Index (DXY), which measures the value of the US Dollar against the six other major currencies, trades around 104.30 with 2-year and 10-year yields on US Treasury bonds standing at 4.46% and 4.19%, respectively, at the time of writing.

However, the upside of the USD could be potentially constrained by soft labor data, which enhances market expectations for a Federal Reserve (Fed) rate cut in September. According to CME Group’s FedWatch Tool, markets now indicate a 93.5% probability of a 25-basis point rate cut at the September Fed meeting, up from 85.1% a week earlier.

US Initial Jobless Claims increased more than expected, data showed on Thursday, adding 243K new unemployment benefits seekers for the week ended July 12 compared to the expected 230K, and rising above the previous week’s revised 223K