Swiss Franc weakens following soft inflation, manufacturing data
USD/CHF extends its gains for the second successive day, trading around 0.8090 during the European hours on Monday. The pair remains on a stronger footing as the Swiss Franc (CHF) holds onto losses following the release of soft domestic inflation and manufacturing data.
The Swiss Franc continues to weaken, following a report of subdued inflation and manufacturing data in Switzerland. On Monday, the USD/CHF pair gained momentum for the second consecutive day, reaching 0.8090 during European trading hours. Despite this, the Swiss Franc has been struggling as domestic inflation figures and manufacturing data have been disappointing.
In July, Swiss consumer prices only rose by 0.4% year-on-year, the weakest growth since March and a slight drop from the 0.5% increase in June. Annual core inflation, which excludes volatile items, remained unchanged at 0.3%. Monthly consumer prices saw a 0.1% decline, marking the first contraction in six months. Nomura strategists suggest that "car fuel prices played a role in the slowdown of Swiss inflation in July," indicating a trend of disinflation.
They also expect inflation in Q3 to be below the Swiss National Bank's forecast, further weakening the Swiss Franc's position. The SVME Manufacturing PMI for Switzerland fell to 53.2 in July from 54.3 in June, missing market expectations and reaching its lowest level since February. However, the potential rise for the USD/CHF pair might be limited by the broader weakness of the US Dollar, due to the joint foreign exchange interventions by Japan and the United States.
The Japanese authorities confirmed these coordinated yen-buying operations, with the Bank of Japan spending up to $58.97 billion. Tokyo has indicated their readiness to intervene further if necessary, stressing continuous communication with their US counterparts. Additionally, the Greenback is facing difficulties due to easing market risk aversion, triggered by possible diplomatic progress between Washington and Tehran.
After US President Donald Trump announced a pause on planned military strikes, markets responded positively, with strategists at BNY Mellon predicting that the upcoming week will determine if markets can cope with policy uncertainty while needing more solid evidence from data and earnings.
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