The Swiss Franc/Euro cross has been exceptionally strong over the last few months. Second day of EUR/CHF currency cross down on weak Eurozone inflation figures. As of that most recent trading session, the EUR/CHF rate was in the low 0.9320s. The Euro fell immediately after the European Central Bank (ECB) announced that it would maintain its interest rates. This action supports the idea that monetary policy has done all it can do.
Perhaps that’s why the latest inflation report was met with Eurozone core inflation staying flat month-on-month. It increased by 0.3%, a sign of persistent underlying price pressures across the region. European statistics HICP Inflation The Core Harmonized Index of Consumer Prices (HICP) registered a 2.3% year-on-year increase. This is the inflation index that excludes volatile items such as food and energy. This number is in line with expectations and prior month’s results.
The monthly price increase missed expectations. Price growth slowed sharply to 0.1% in August. This increase was below the expected 0.2% and a deceleration from July’s increase of 0.2%. Headline inflation did drop to 2.0% y/y in August. This is a decrease from July’s rate of 2.1% and just below what markets had expected. Taken together, these figures point to increasing disinflationary pressures throughout the Eurozone economy, helping explain the Euro’s continued struggle.
The Swiss National Bank (SNB) is keeping a flexible policy dovish – rather than explicit dovish – bias. This as they move towards their monetary policy decision scheduled for September 25. SNB Chairman Martin Schlegel explained just last week that negative interest rates are an issue not worth worrying about right now. Accompanying that statement was his insistence on the bank’s flexibility to respond to dramatic shifts in economic data. Federal Reserve market participants can’t wait to hear about inflation and growth risk predictions getting revised up or down. These evaluations will be key in undergirding the SNB’s forthcoming decisions.
The Swiss Franc outperformed even the more positive story against all other major G10 currencies. It closed up against the Euro with a 0.15% boost. Yet, it experienced small drops compared to the US Dollar (-0.15%), British Pound (-0.11%), and Japanese Yen (-0.08%). The CHF’s movements nicely illustrate a poor day for the major currencies overall, still showcasing the varied, complicated nature of today’s foreign exchange trading.
The heat map showing percentage changes of all major currencies against each other provides even more insight into today’s market. The CHF saw minor changes in value against a number of currencies. It was up 0.03% against the CAD, 0.07% against the AUD and 0.11% against the NZD. These types of movements show currency traders’ reactions to what they’re seeing in the recent economic news on both sides of the border.