Swiss inflation unchanged, Swiss franc extends gains

[Ben Graham]

The Swiss franc gained 1% against the US dollar last week and has extended its gains on Monday. In the North American session, USD/CHF is trading at 0.8079, up 0.48% on the day.

Swiss inflation flat in July

Switzerland's inflation rate was unchanged in July, above the market estimate of -0.2% but below the June reading of 0.2%. Core CPI, which excludes food and energy rose from 0.8% in July, up from 0.6%, in June and its highest level in four months.

The Swiss National Bank has cut rates aggressively as inflation as eased. The central bank has lowered rates for six consecutive meetings and cut the cash rate to zero in June. SNB President Martin Schlegel has said that the Bank would prefer not to reintroduce negative rates but if inflation falls the Bank would likely return to negative rates.

The SNB is also concerned after US President Trump announced that the US will slap 39% tariffs on Switzerland as of Aug. 7, which will hurt the export-reliant Swiss economy. If economic data shows that the tariffs are hurting the economy, the SNB could respond by lowering rates into negative territory.

US nonfarm payrolls misses estimate

The week ended with a softer-than-expected US jobs report. Nonfarm payrolls for July rose by only 73 thousand, missing the market estimate of 110 thousand. Making things worse, the June and May reports were both revised sharply lower, down by a combined 258 thousand. The unemployment rate ticked higher to 4.2%, up from 4.1%.

The weak numbers support the case for the Fed to lower interest rates at the next rate meeting in September. The likelihood of a cut has climbed to 75%, compared to 63% on Thursday. The latest NFP figures should save as a wake-up call that the labor market may be in more trouble than previously anticipated.

USD/CHF Technical

• USD/CHF has pushed above resistance at 0.8052 and is testing resistance at 0.8074. Above, there is resistance at 0.8091
• 0.8035 and 08013 are providing support

USDCHF 4-Hour Chart, Aug. 4, 2024

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