USD/CHF extends its reversal below 0.8040 with US jobs data on focus

• The US Dollar extends losses as markets ramp up bets of Fed cuts.
• Previous US employment data disappointed this week, and the market expects the NFP report to remain in that line.
• In Switzerland, the soft CPI figures are weighing on the CHF's recovery attempts.

The US Dollar is on its back foot amid a brighter market mood on Friday, with investors bracing for a soft US Nonfarm Payrolls report later today to confirm market expectations of a Fed rate cut in September.

Dollar bulls were capped on Thursday right above 0.8070, and the pair slides further against a firmer Swiss Franc on Friday, retreating to 0.8035 at the time of writing, although still on track to close the week with a 0.4% gain.

Weak US labour data boosts hopes of Fed cuts

US employment data seen earlier this week has confirmed that the labor market is losing momentum, and the market expects August's Nonfarm Payrolls report to confirm that trend. The market consensus anticipates a 75k increase in Payrolls, following a 73K rise seen in July.

These figures, along with the dovish comments from diverse Fed speakers this week, have consolidated investors' expectations of Fed easing, pushing US Yields and the US Dollar lower across the board. The CME Fed Watch tool shows a 99.4% chance of a quarter-point rate cut this month, up from 86% in the previous week.

In Switzerland, the August Consumer Price Index data released on Thursday provided mixed signals. On the one hand, yearly inflation remained steady at 0.2%. Still, on the other hand, the monthly CPI contracted unexpectedly, which keeps expectations of negative interest rates alive and adds significant weight to the Swiss Franc's recovery attempts.