USD/CHF wobbles near six-week low around 0.8200, US NFP in focus

• USD/CHF trades cautiously around 0.8200, while investors await key US NFP data for May.
• Disappointing US ADP Employment and ISM Services PMI data for May have battered the US Dollar.
• The Swiss CPI deflated by 0.1% in May, paving the way for more interest rate cuts from the SNB.

The USD/CHF pair trades with caution near the six-week low around 0.8200 during late Asian trading hours on Thursday. Investors brace for significant volatility in the pair as the United States (US) Nonfarm Payrolls (NFP) data takes centre stage, which will reflect the current status of the labor market.

The US Dollar (USD) fell sharply on Wednesday after the release of a string of disappointing US economic data for May, notably a sharp slowdown in the private sector labor demand. The ADP Employment Change data showed that the private sector added 37K fresh workers, the lowest reading seen since the Covid era in February 2021.

Additionally, weak Services PMI and rising input costs in the services sector, which accounts for the two-third of the overall economic activity, have prompted stagflation risks. According to the US ISM Services PMI report, activities in the sector unexpectedly declined, and the sub-component Prices Paid grew at a faster pace. The scenario of rising input costs and contraction in business activity often leads to stagflation.

On the trade front, investors seek fresh cues on trade negotiations between Washington and Beijing. On Wednesday, the comments from US President Donald Trump in a post on Truth.Social signaled that trade negotiations with Chinese leader Xi Jinping won't be easy. "I like President Xi of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!" Trump wrote.

In the Swiss region, the scenario of deflation has raised expectations of an interest rate cut by the Swiss National Bank (SNB) in the monetary policy meeting on June 19. On Tuesday, the data showed that the Swiss Consumer Price Index (CPI) deflated by 0.1% on year, as expected, in May after remaining flat in April.

SNB President Martin Schlegel already warned in an event in Basel in the last week of May that Swiss inflation could enter negative territory, Reuters reported. However, he ruled out expectations that short-term inflation hiccups could lead to monetary policy adjustments, stating that the central bank is more focused on maintaining price stability in the medium term.

"Even negative inflation figures cannot be ruled out in the coming months," Schlegel said and added, "The SNB does not necessarily have to react to this."