Swiss franc jumps after soft US job numbers

The Swiss franc has posted sharp gains in the North American session on Friday. USD/CHF is currently trading at 0.8754, up 0.86% on the day. The Swiss franc is on a roll and is trading at its highest level since the end of January.

Swiss inflation declined 0.2%, in line with expectations

Switzerland’s inflation rate declined 0.2% m/min July, after no change in June and in line with the market estimate. Yearly, inflation remained at unchanged at 1.3% and matched the market estimate. This was the first decline in eight months. The core rate was also unchanged at 1.3%.

Inflation remains comfortably within the Swiss National Bank’s target range of between 0% and 2%. Inflation is much lower than in most of the other major economies but the central bank remains vigilant and in March it was the first major central bank to lower interest rates in a surprise move. The SNB cut a second time in June which lowered the cash rate to 1.25%.

SNB chair Thomas Jordan said after the second cut that the Bank lowered rates because of lower inflation and the strong Swiss franc. The SNB meets next in September and there is a strong possibility of another rate cut, as inflation remains on a downswing and the Swiss franc has soared 5.8% against the US dollar since May 1. Some US data has indicated the economy is weakening and investors have moved funds to safe haven assets like the Swiss franc.

US nonfarm payrolls slide below expectations

US nonfarm payrolls slipped badly in July, falling to 114 thousand. This was down from the revised 179 thousand in June and below the market estimate of 175 thousand. The unemployment rate rose to 4.3%, up from 4.1% which was also the market estimate. As well, wage growth fell in July from a revised 3.8% y/y to 3.6%, and monthly from 0.3% to 0.2%. Both wage growth readings missed the market estimate. In the aftermath of the employment report, the US dollar has retreated against most of the major currencies.

The weak employment numbers point to a US labour market which is cooling down and will raise expectations for a historic rate cut in September. The Federal Reserve has signaled that it could lower rates at the September meeting if inflation continues to move lower.

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USD/CHF Technical

• USD/CHF has pushed below support at 0.8699. Below, there is support at 0.8621
• There is resistance at 0.8768 and 0.8846

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