USD/CHF reaches highs near 0.8080 after downbeat Swiss Industrial data

• The US Dollar retraces previous losses and reaches daily highs near 0.8080.
• A moderate risk aversion ahead of the Trump-Zelenskyy meeting is providing some support to the USD.
• In Switzerland, Industrial Production contracted in Q2, adding negative pressure on the CHF.

The US Dollar bounced up against the Swiss Franc on Monday to retrace Friday's losses. The Greenback is firming up against most of its peers on Monday, with all eyes on the Trump-Zelenskyy meeting later today, while Swiss Industrial production data added concerns about the economic momentum.

Investors remain wary of risk as media reports suggest that Trump will pressure his Ukrainian counterpart into accepting Putin's conditions for a peace deal. These demands, mostly involving giving up territory to Russia, have been flatly rejected by Zelensky on previous occasions and are unlikely to find supporters among the European leaders who will be joining the summit.

Risk aversion amid geopolitical uncertainty is buoying the US Dollar

In this context, a moderate risk aversion is offsetting market expectations of Fed rate cuts in September, which are still at 84%, despite the strong Retail Sales data seen on Friday, and providing some support for the US Dollar.

US Dollar sellers might also trim their short positions as we head to a key conference by Fed Chairman Jerome Powell on Friday. There is a high risk that Powell will not sound dovish enough, considering the current market expectations, a possibility that would cast further shadow on the September rate cut scenario.

In Switzerland, recent data revealed that Q2 industrial production contracted 0.1% following an 8.9% growth in the previous quarter. These figures suggest that the economy is likely to face a significant setback from the hefty tariffs on exports to the US, which might force the SNB to cut rates into negative levels.