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Swiss CPI Fails to Impress

Swiss CPI Fails to Impress

2010-03-09 11:02:00
Michael Wright, Currency Analyst
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Overview
Consumer Prices in Switzerland advanced 0.1% in February after shedding 0.1% in January, with the reading slightly missing economists forecast for a 0.2% rise. At the same time, annualized prices climbed 0.9% amid forecasts for a 1.0% gain, while core prices which exclude food and energy costs, rose 0.5% from a year earlier, the Swiss Statistics Office in Neuchatel said today. Going forward, a rate hike on Thursday is surely out of the question, but market participants will look for any change in language by policy makers.

Breakdown
Taking a closer look at the breakdown of the report, seasonal goods posted the largest monthly increase, with prices surging 1.1%, while petroleum products retreated 1.9% to taper the advance. 

Inflation Breakdown

Market Reaction
Following the less-than-expected release, the USD/CHF, jumped about 15 pips to reach an overnight high of 1.0761, and slip above the 20-day SMA (1.07555). Looking at the daily chart, the market looks to correct the pair from overbought levels, but downside risks may be likely capped around the 1.0500 range, and an upside soft target of 1.0900 may be reached in the near term. 

USD/CHF

Forecast
Looking ahead, investors are pricing in a zero percent chance that the Swiss National Bank will raise rates twenty five basis points at its next rate decision meeting later this week on March 11th, according the Credit Suisse Overnight index swaps. Previously, the central bank discussed the strength of their national currency and in turn has intervened in the market to devalue the Swiss franc. Indeed, some traders expect this to further happen and a likely aim for the EUR/CHF in the long term looks to be around the 1.5000 area that the SNB have stated is their fair value point.


Read the trading the news report daily for a detail description of today’s most-expected news release. DailyFX analysts review the expectations, recent history, and illustrate how to trade the event.

Written by Michael Wright, DailyFx Research
Questions? Comments? Email me at instructor@dailyfx.com


 

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