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• USD/CHF rises as market sentiment turns cautious over the Federal Reserve’s independence.
• The Fed is expected to deliver a 25 basis point rate cut in September after weaker labor data.
• The CHF weakens on concerns over US tariffs affecting Swiss exports.

USD/CHF continues to gain ground for the second successive session, trading around 0.8110 during the European hours on Tuesday. The pair remains stronger as the US Dollar (USD) advances ahead of the release of US ISM Purchasing Managers Index (PMI) data due later in the day.

Risk aversion increased after US Federal Reserve (Fed) Governor Adriana Kugler unexpectedly resigned on Monday. This has increased concerns about the US Federal Reserve’s (Fed) independence, as President Donald Trump now has an earlier-than-expected opportunity to shape the central bank's direction. Trump may nominate a replacement potentially more aligned with his calls for lower rates.

The US Federal Reserve (Fed) is expected to reduce its interest rates in September, following weaker labor market data that has heightened concerns over the US economic outlook. Fed Bank of San Francisco President Mary C. Daly highlighted plenty of reasons to start looking at interest rate cuts. However, prevailing uncertainty makes it difficult for Fed officials to step into rate trimming too quickly. We can't wait to be certain there is no inflation persistence, need to make a call based on what's most likely, Daly added.

The USD/CHF pair also gained ground as the Swiss Franc (CHF) struggles amid growing concerns about the impact of US tariffs on Swiss exports. On August 1, the Trump administration announced a 39% tariff on Swiss goods, an increase from the 31% rate introduced in April, taking effect on August 7. The higher tariffs are likely to deepen disinflationary pressures in Switzerland. Meanwhile, inflation edged up slightly in July, rising to 0.2% year-on-year, above the forecast of 0.1%.

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