"The minimum exchange rate is very important. It remains a crucial tool of our monetary policy in order to avoid a tightening of monetary conditions in Switzerland."
- Thomas Jordan, SNB President
The Swiss Franc lost some ground versus the single currency on Thursday, due to the weaker-than-expected producer prices inflation report. Even though some economists may consider that Alpine economy is on the path of sustain recovery, a report from the Federal Statistical Office showed that producer and import prices plunged last month. The PPI, which measures the change in the costs of goods and raw materials acquired by manufacturers, fell 0.3% on an annual basis, and inched down 0.4% from a month earlier. Analysts, however, expected a 0.3% gain on a monthly basis. The latest fundamental data is suggesting that even despite some improvement in the country's biggest trading partner, structural problems still persist.
Meanwhile, EUR/CHF behaved quite unexpectedly during the last couple of days. While almost every other Euro pair took a hit after ECB's decision to cut interest rates, EUR/CHF remained relatively calm. It means either the pair is forgotten by investors, what is unlikely to happen, or there is some support from the SNB even though they did not intervened the markets for more than a year. While there is no risk the SNB would cut rates, as they are at 0%, the ECB may decide to add more liquidity into markets, hence traders might now move out of Euro positions, pushing the Franc higher, and adding more pressure on the SNB to defend the cap.
© Dukascopy Bank SA