USD/CHF: Swiss franc braces for headwinds as inflation slips

The USD/CHF price tilted upwards on Monday as investors reacted to the encouraging Swiss consumer price index (CPI) data. The pair rose to a high of 0.900, higher than last Friday’s low of 0.8935. 

Encouraging Swiss inflation data

Switzerland reported encouraging consumer inflation data on Monday. According to the country’s statistics agency, the headline inflation dropped sharply in June. The main CPI dropped to 0.1% in June from the previous 0.3%. This decline was better than the median estimate of 0.2%. 

Swiss inflation retreated to a year-on-year low of 1.7%, lower than the previous 2.2%. This means that the Swiss inflation moved below the Swiss National Bank’s target of 2.0%, which is an important move.

Despite this move, analysts believe that the SNB will maintain its hawkish tone this year. Most economists expect the bank will hike interest rates by 0.25% when it meets in September this year.

Another CHF news came from Procure, which published the latest PMI report. The data showed that the country’s PMI jumped from 43.2 in May to 44.2 in June this year. While this was an improvement, it remained below 50, meaning that the manufacturing sector is still contracting.

Looking ahead, the next important USD/CHF catalyst will be the upcoming US jobs numbers scheduled for Friday. Economists expect the data to show that the labor market weakened slightly in June. They also expect the unemployment rate remained at a multi-decade low.

Most analysts expect that the Fed will resume its rate hikes later this month. Recent numbers have shown that the American economy was still strong. The housing sector is doing well while retail sales are holding steady.

USD/CHF technical analysis

USD/CHF chart by TradingView

The USD to CHF price has moved sideways in the past few days. In this period, the pair has moved below the important level at 0.9051, the lowest level in February. Along the way, the pair has moved slightly below the 25-day and 50-day moving averages.

The USD/CHF has formed a small bearish flag pattern, which is a bearish sign. Therefore, the pair will likely have a bearish breakout in the coming weeks as traders eye the year-to-date low of 0.8827.