The Swiss franc experienced a turbulent session on Thursday, initially weakening before recovering ground as two conflicting economic data releases painted a mixed picture for Switzerland's monetary policy outlook. The currency first slipped after softer-than-expected March inflation data fueled speculation of further interest rate cuts by the Swiss National Bank (SNB), but then found support when April trade surplus figures remained steady.
Inflation Miss Triggers Initial Weakness
Switzerland's consumer price index (CPI) rose by just 0.3% month-on-month in March, well below the 0.5% consensus forecast, according to the Swiss Federal Statistical Office. Annual inflation eased to 1.2% from 1.4% in February, missing the 1.3% expectation. Core CPI, excluding food and energy, also moderated to 1.1% year-on-year — its lowest since early 2022. The data reinforced the view that price pressures remain subdued, giving the SNB room to further ease policy. Markets quickly priced in a roughly 40% chance of a 25-basis-point cut at the June meeting, sending USD/CHF toward 0.8850 from earlier lows.
Trade Surplus Caps Losses
Later, Switzerland reported a trade surplus of CHF 3.6 billion for April, essentially unchanged from March’s revised CHF 3.5 billion. Exports edged up 0.4% month-on-month, while imports fell 1.2%, keeping the surplus stable. The pharmaceutical and chemical sectors offset weaker demand in machinery and watches. The steady surplus suggested the export sector remains resilient and reduced the urgency for aggressive SNB intervention. USD/CHF retreated from intraday highs near 0.8950 to around 0.8920, and EUR/CHF dipped slightly to 0.9630.
Outlook and Implications
Analysts at UBS noted the SNB is likely to keep rates on hold at its next meeting but may use verbal intervention to prevent excessive franc strength. For forex traders, the evolving rate differential between the US and Switzerland remains key. A sustained surplus provides a floor for the franc, but global risk sentiment and any further dovish SNB signals could still pressure it. The SNB’s balancing act — supporting exports while guarding against deflation — will continue to drive CHF volatility.
