USDCHF Breaks Resistance After the Swiss Inflation and Retail Sales Fall in October

USDCHF experienced a retreat this week after failing to break above the 0.87 mark, despite showing respectable gains throughout October, rising about 2 cents. However, today’s jump has brought the price back at the highs, after the declinein Swiss CPI inflation and retail sales during October.

Technical indicators on daily and weekly charts suggest the pair is now in overbought territory. The risk premium for the Swiss franc as a safe-haven asset has recently decreased, especially as tensions in the Middle East have not escalated further. Israel’s response to Iran did not lead to a larger conflict, and discussions in Lebanon are leaning towards a potential agreement, leaving the Gaza situation as the remaining conflict.

The Swiss National Bank (SNB) has reiterated that further rate cuts may be warranted, considering Switzerland’s economic fragility and low inflation. This softer SNB policy stance has supported USD/CHF ‘s gains and is likely to sustain its bullish outlook in the coming months.

USD/CHF Chart Daily – The 20 SMA Turned into Support

Earlier this week, SNB Chairman Martin Schlegel stated that more rate cuts might be needed in the next few quarters to maintain price stability. The SNB’s inflation forecasts remain in the stability range, with projected inflation rates of 1.2% in 2024, 0.6% in 2025, and 0.7% in 2026. Schlegel also affirmed the Bank’s readiness to actively intervene in currency markets if necessary, maintaining negative rates in its policy toolkit.

He added that the EUR/CHF pair remains near all time lows, reflecting the market’s cautious outlook on the Swiss franc, despite the SNB’s earlier rate cuts relative to other major central banks. Schlegel’s recent comments about potentially lowering rates further align with previous SNB policy guidance, signaling that the Bank is prepared to act in response to pressures on the franc. Right now, the pair is testing the 0.87 level again.

Swiss Inflation CPI Report for October

• Year-over-Year (Y/Y) CPI: +0.6%, below the expected +0.8% and prior +0.8%.
• Month-over-Month (M/M) CPI: -0.1%, above the expected -0.3%, but below prior 0.0%.
• Core CPI Y/Y: +0.8%, lower than the previous +1.0%.

Swiss Retail Sales October 2024

• Retail Sales Y/Y: +2.2%, short of the forecasted +2.5% and lower than the revised prior +2.7%.
• Retail Sales M/M: -0.5%, down from the previous month’s revised +0.1%.

Swiss Manufacturing PMI October 2024:

• Manufacturing PMI: 49.9 points, matching the previous month’s reading and slightly above the 49.8 expected, signaling a close-to-neutral growth rate in the sector.
• September manufacturing PMI reading was 49.9 points

USD/CHF Live Chart