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by USDCHF—The Swiss franc bounced back to $0.91, recovering from a seven-month low of 0.92 on May 1st. This shift came after unexpected inflation data led markets to reconsider the extent of looser policy by the Swiss National Bank (SNB).
Inflation Data Lifts Franc from 7-Month Low
Inflation Data Lifts Franc from 7-Month Low
Bloomberg—Annual inflation in Switzerland rose to 1.4% in April, up from a two-and-a-half-year low of 1% in March. This increase surpassed market expectations of 1.1%. The SNB had previously indicated that prices were susceptible to shocks due to ongoing geopolitical tensions and its loosened control over the franc.
Foreign currency reserves have grown for the fourth consecutive month since hitting seven-year lows in November.
Market Reactions and SNB Policy
The rapid increase in consumer prices has raised concerns about potential second-round effects, reducing expectations of another SNB rate cut in June. This development suggests that the SNB may adopt a more cautious approach.
Fed’s Impact on the Swiss Franc
At the same time, the Swiss franc was bolstered by a softer US dollar. The Federal Reserve recently refrained from delivering overly hawkish signals in its latest rate decision, contributing to the dollar’s relative weakness.
Conclusion
In conclusion, the Swiss franc’s recent rebound can be attributed to higher-than-expected inflation data and a softer US dollar. Traders should closely monitor the SNB’s policy decisions and global economic indicators to make informed investment choices. The current environment highlights the importance of staying vigilant and adaptable in the forex market.
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