USDCHF Breaks the 0.90 Support As Swiss CPI Grows

The CHF to USD rate was trading in a 2-cent range for two months, with USD/CHF finding support at the 0.90 zone, but yesterday the support was broken after the dip in the USD. This currency pair tumbled significantly in the US session after a miss in US manufacturing ISM. The 200 SMA which was acting as support on the daily chart was broken but the 100 SMA held as support around the 0.8950 level.

The Swiss Consumer Price Index (CPI) for month-over-month (M/M) is predicted to rise to 0.4%, up from the previous 0.3%. In recent data, the year-over-year (Y/Y) inflation rate exceeded expectations, coming in at 1.4% compared to the projected 1.1%. Despite this recent spike, the inflation rate is anticipated to return to 1.1%. The likelihood of a rate cut by the Swiss National Bank (SNB) in June remains uncertain.

However, if the CPI data was to fall below expectations (a downside surprise), it could increase market confidence in another rate cut. SNB Chairman Thomas Jordan mentioned that rising inflation threats in Switzerland could be linked to a weaker Swiss Franc (CHF). To counter this, the SNB might engage in purchasing CHF to support the currency.

USD/CHF Chart Daily – The 200 SMA Has Been Broken

In this context, a higher-than-expected CPI was likely to strengthen the Swiss Franc. This would lead the market to discount the possibility of a June rate cut and anticipate measures by the SNB to bolster the currency, reducing inflationary pressures. Thus, the Swiss Franc would receive a significant boost from positive inflation data, reinforcing market sentiment against a rate cut and in favor of SNB intervention to maintain currency stability.

Swiss CPI Inflation Report for May

• Switzerland’s May Consumer Price Index (CPI) rose by 1.4% compared to the same period last year, meeting expectations.
• The Core CPI, which excludes volatile items such as food and energy, increased by 1.2% year-on-year, also in line with expectations.

Given that these figures closely mirror those of April, it suggests a continuation of stable inflationary pressures. This consistency in inflation data may provide the Swiss National Bank (SNB) with the necessary confidence to consider further easing measures later this month.

USD/CHF Live Chart