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Swiss franc recoups recent losses against US dollar

Swiss franc recovers losses vs. USD, EUR after soft inflation print

The Swiss franc appeared on track to recover recent losses in European trading on Thursday against a basket of major rivals. The franc had veered close to five-week lows against the US dollar on the previous day following a softer-than-expected Swiss inflation data reading.

Weak price pressures are likely to prompt Swiss National Bank (SNB) policymakers to cut interest rates in September for the third time this year.

As of 12:50 GMT, the US dollar eased 0.16% against the Swiss franc to 0.9002. The franc had closed Wednesday up 0.3% against the greenback, marking its first gain in three days and moving away from five-week lows at 0.9050.

The franc largely traded flat at 0.9714 against the euro after hitting a one-month low of 0.9755 earlier, according to FactSet data.

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Rate cut bets add to Swiss franc pessimism, analyst says SNB faced with task of “reflating” prices

Consumer prices increased by 1.3% year-on-year in June, Switzerland’s statistics office reported on Thursday. This figure is below economists' estimates and down from May’s 1.4%, which was the highest rate this year.

The slowdown was aided by a 0.2% annual decrease in the cost of goods, while services saw a 2.4% rise. Core inflation also moderated to 1.1%, contrary to expectations that it would accelerate.

The data all but confirms a third Swiss interest rate cut by the SNB later this year.

The Swiss National Bank now faces increased pressure to cut interest rates after Thursday’s lower-than-expected inflation data, adding to Swiss franc pessimism amid the currency’s recent bouts of weakness, according to Scope Markets analyst Joshua Mahony.

The SNB will be "faced with the task of reflating prices just as their Western counterparts attempt to drive down inflation," Mahony stated in a note cited by the Wall Street Journal on Thursday.

Economists see one more SNB cut this year

The SNB has cut interest rates at its last two meetings, kicking off its monetary easing campaign ahead of global peers like the European Central Bank. With the Swiss benchmark now at 1.25%, economists anticipate one more reduction this year, though it remains uncertain whether it will occur in September or December, as per Bloomberg.

Policymakers have indicated that the third quarter will experience slightly faster inflation, which is expected to slow down and reach 1% by 2026. Without the rate cuts, the forecast would have been even lower, SNB President Thomas Jordan stated this month.

Switzerland boasts one of Europe’s lowest inflation rates. Inflation data from the neighboring Eurozone showed prices rose by an annual 2.5% in June, slightly down from May. Based on the European Union’s harmonized measure, Swiss inflation saw a 1.3% increase last month.


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