USDCHF Analysis – Inflation and SNB Policy

USDCHF Analysis – The Swiss franc recently rebounded to 0.91 per USD from a seven-month low of 0.92 on May 1st. Higher-than-expected inflation data in Switzerland drove this comeback.

In April, annual inflation rose to 1.4% from 1% in March, surpassing market expectations of 1.1%. This unexpected increase in inflation has impacted market expectations regarding the Swiss National Bank’s (SNB) policy moves.

USDCHF Analysis - Inflation and SNB Policy

USDCHF Analysis – Inflation and SNB Policy

Inflation and SNB Policy

The SNB had previously noted that prices were sensitive to shocks due to ongoing geopolitical tensions and its looser control over the franc. The bank’s foreign currency reserves have increased for the fourth consecutive month since hitting a seven-year low in November.

The recent rise in consumer prices has raised concerns about potential second-round effects. These factors have reduced expectations of the SNB implementing another rate cut in June.

Impact of Global Factors

At the same time, the franc’s strength has been supported by a softer US dollar. The Federal Reserve recently refrained from giving strong signals about further rate hikes, which helped to support the Swiss currency. As a result, the franc benefited from the combination of domestic inflation concerns and a less aggressive stance from the Fed.

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