USD/CHF plunges below 0.8000 as weak NFP boosts odds of deeper Fed cuts

• The Swiss Franc strengthens as USD/CHF drops below 0.8000 to its lowest since late July.
• Weak US NFP data fuels Fed rate cut bets and triggers broad US Dollar selling.
• Focus now shifts to next week's US CPI report, a key test for Fed expectations.

The Swiss Franc (CHF) gains ground against the US Dollar (USD) on Friday, with USD/CHF sliding below the 0.8000 psychological mark to touch its lowest level since July 28. At the time of writing, the pair is trading near 0.7972, down almost 1.0% on the day, as the Greenback came under heavy selling pressure in the wake of disappointing US Nonfarm Payrolls (NFP) data, with the pair reversing all the gains registered earlier this week.

The decline comes amid a shift in market sentiment after the August NFP report confirmed a cooling labor market. The US economy added just 22K jobs in August, well short of the 75K forecast, while the Unemployment Rate climbed to 4.3%, its highest since late 2021. Wage growth rose in line with expectations, but the soft headline figure deepened conviction that the Federal Reserve (Fed) will lower interest rates later this month.

Traders had already been positioned for a 25 basis point (bps) cut, but futures now imply a 12% chance of a larger 50 bps move, up from zero prior to the jobs report, according to the CME FedWatch Tool.

In response to the weak NFP data and the repricing of Fed rate cut expectations, the Greenback weakened across the board, with the US Dollar Index (DXY) sliding to its lowest level since July 28 before stabilizing just above 97.50. At the same time, US Treasury yields tumbled, with the 10-year dropping to 4.08% and the rate-sensitive 2-year falling to 3.49%, both marking their lowest levels since April.

White House Senior Adviser Kevin Hassett described the August jobs report as "a bit of a disappointment," though he stressed that inflation remains low and economic growth is solid. Speaking to CNBC and later reporters, Hassett underlined that "an independent Fed is really important for growth" and expressed confidence in the outlook, saying "Trump knows we're optimistic about the future of jobs numbers." He noted that large data revisions have complicated the picture, adding that "we need to do a better job of adjusting data." On monetary policy, Hassett said there is "a lot of reason for optimism," but acknowledged the Fed will "want to consider what moves it will make," suggesting policymakers may discuss a "higher cut" at the upcoming meeting.

Attention now turns to the US Consumer Price Index (CPI) report due next Thursday, which will provide the next key test for Fed expectations. While sticky inflation remains a risk that clouds the outlook, the NFP miss has already pushed traders to begin pricing in the possibility of a 50 bps cut. A softer CPI print would likely strengthen those expectations and add further downside pressure on the Greenback.