USD/CHF climbs as Swiss GDP contraction weighs on Franc, US Dollar steadies

• USD/CHF holds firm around 0.8020, supported by the weaker Swiss Franc and a stabilizing US Dollar.
• The contraction in Swiss GDP undermines the Franc, while markets await the Federal Reserve minutes.
• Concerns over the US economic slowdown and the government shutdown limit the US Dollar's momentum.

USD/CHF trades higher on Wednesday, around 0.8020 at the time of writing, rising 0.30% on the day. The pair extends its rebound from last week's one-month low near 0.7880, supported by a combination of fundamental drivers.

The recent weakness of the Swiss Franc (CHF) continues to support the pair. Data showed that Switzerland's GDP contracted in the third quarter for the first time in more than two years, weighing on the Franc and reducing the appeal of Swiss assets. Meanwhile, the US Dollar (USD) stabilizes near a one-week high as investors scale back expectations of another interest rate cut by the Federal Reserve (Fed) in December.

However, the greenback remains capped by growing concerns over the US economic outlook. The longest-ever United States (US) government shutdown is hurting confidence and could push the central bank toward further policy easing. The release of the Federal Open Market Committee (FOMC) minutes later in the day will therefore be closely monitored for clues on the future rate-cut path.

Several recent labor-market indicators have also confirmed a cooling US economy. Weekly Initial Jobless Claims rose more than expected, while ADP private payroll data showed that firms shed an average of 2,500 jobs per week over the past four weeks. These signs of weakness support expectations of additional monetary easing and limit the upside potential of the US Dollar.

Traders now await the delayed Nonfarm Payrolls (NFP) employment report, scheduled for Thursday, a key release in a period when economic data is disrupted by the shutdown.