Swiss Franc Weakens, Nonfarm Payrolls a New Threat
The USD/CHF currency pair rose on Thursday (July 2nd) after Swiss inflation slowed more than expected. The US dollar managed to recover from a session low of 0.8080, while the Swiss franc began to lose steam after the latest inflation data was released.
Swiss consumer inflation was recorded as stagnant, growing 0% on a monthly basis in June. This figure was lower than the 0.2% increase in May and also below market expectations of 0.1%. On an annual basis, Swiss inflation slowed to 0.5% from 0.6%.
This data reinforces the view that the Swiss National Bank (SNB) is likely to maintain its benchmark interest rate at 0%. With low inflation, the Swiss central bank is considered to have little incentive to raise interest rates in the near future.
This situation makes it difficult for the Swiss franc to continue its strengthening, especially when the market is actually increasing the chances of a Federal Reserve interest rate hike. The divergence in policy direction between the Fed and the SNB is a key factor holding back the CHF's rally against the US dollar.
Market focus now shifts to the US Nonfarm Payrolls report. The data is expected to show an additional 110,000 jobs in June. If the results are stronger than expected, the US dollar could strengthen further and push USD/CHF back closer to its one-year high around 0.8140. (asd)
Source: Newsmaker.id
