Swiss Inflation Weakens Early in 2011; Franc Drops
Consumer prices in Switzerland unexpectedly declined in January led by falling prices for holiday packages. The Federal Statistics Office said that prices increased 0.3% from a year earlier, missing expectations of a 0.6% rise and slipping from December’s 0.5% rise. For now the SNB can remain sidelined with previous talk of growing price pressures seeming a little misplaced at this time. While price pressures may grow as the Swiss franc weakens over the coming months, for now the central bank can breathe easy, keeping any rate hikes well into the future.
The Swiss franc was immediately weaker after the release with players exiting positions as expectations of imminent action from the SNB ease as consumer prices fall. Franc bears will eye yesterday’s 0.9665 high as a near-term target, if gains can be held. The 100-day SMA above that at 0.9690 will be the next level of resistance for the USD/CHF pairing before potentially testing 2011 highs by 0.9800.
Written by Jonathan Granby, DailyFX Research Team
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