Swiss Franc Stumbles Following Mix of High Employment and Low Inflation 

THE TAKEAWAY: Swiss CPI in at 0.1% for April, slightly lower than expected -> Low unemployment makes interest rate hike less likely -> Franc falls against USD, little movement against the Euro

Swiss inflation came in 0.1% higher for the month of April compared to March, slightly lower than analysts’ expectations of 0.2%. Consumer Price Index was down 1.0% compared to April of last year, marking seven straight months of year-over-year declines, according to the data provided by the Federal Statistics Office.

Food and non-alcoholic beverage prices were down -0.6% for the month of April. Alcohol and Tobacco were also down -0.8%, while clothing and shoes prices were up 3 percent.

Swiss unemployment rates also came in this morning at 3.1% for April, aligned with expectations and slightly lower than last month’s results. The contained inflation combined with the low unemployment numbers indicates a strong Swiss economy while simultaneously relieving pressures on the Swiss National Bank to raise interest rates.

The SNB is trying to avoid raising interest rates, as it attempts to stop the strengthening of its own currency so its export prices can remain low; that is why the central bank is supporting a 1.2000 floor in EUR/CHF, as Europe makes up 60% of its exports. Therefore, April’s low inflation will only strengthens the central bank's resolve to keep rates unchanged, further indicating a bearish outlook on the Swiss franc.

USD/CHF first fell following the low unemployment numbers, which is usually counterintuitive for strong economic data, and the pair fell again after the contained CPI. EUR/CHF jumped following the jobs report before being knocked back down, and seemed to be on the rise again following the contained inflation.