Swiss franc eyes Swiss CPI and GDP

The Swiss franc has edged higher on Monday. USD/CHF is currently trading at 0.8514, up 0.16% on the day. With US markets closed for Labor Day, we’re unlikely to see much movement from the US dollar today.

Swiss retail sales rebounds

Switzerland’s retail sales for July surprised on the upside, with an impressive gain of 2.7% y/y. This crushed the market estimate of -0.2% and followed a revised 2.6% decline in June. It was the first increase since April and the fastest pace since February 2022. Monthly, retail sales rebounded with a 1.4% gain, up from a revised -0.3% and the market estimate of -0.2%.

The strong retail sales report failed to move the Swiss franc and investors have shifted focus to Tuesday’s inflation report. Inflation is expected to tick lower to 1.2% y/y in August, compared to 1.3% in July. Monthly, inflation is projected to rise to 0.1%, up from -0.2% in July.

The Swiss National Bank has kept inflation within its target of between zero and 2%, although it is keeping a concerned eye on the Swiss franc, which has surged 7.5% against the sagging US dollar since May 1. The Swissy sharp appreciation has kept inflation in check and the central bank has responded by trimming rates twice this year, bringing the cash rate to 1.25%.

The downside of a strong Swiss franc is that it makes Swiss exports more expensive. On Thursday, the Swiss franc dropped to 0.8400, its lowest level since Jan.2. If the Swiss franc’s continues to rise, the SNB could respond by intervening in the currency markets and blunt the upward swing.

Switzerland’s economy is expected to rise 0.5% in the second quarter, unchanged from the first quarter. The Q1 gain was the fastest expansion since the second quarter of 2022 and the service sector continues to drive the economy. Annually, the economy is expected to climb 0.9% in the second quarter, up from 0.6% in Q1.

USD/CHF technical

• 0.8520 is a weak resistance line. Above, there is resistance at 0.8541.

• 0.8491 and 0.8470 are providing support.