Swiss Franc Falls After Inflation Report

The Swiss National Bank received a nice surprise today in the form of lower than expected inflation number for April, which means it can wait with a rate hike for now. The Swiss currency (CHF) has had a very impressive rally in recent months because of its robust economy and periodic flight to safety during risk-off trade sessions that have appeared regularly.

As a result, the Franc has reached unprecedented levels against the US Dollar (USD), while being at or around historic highs against the Euro (EUR), Japanese Yen (JPY) and other major currencies. The trend puts pressure on country's exporters and could eventually hurt Swiss exports, as a stronger currency means higher prices for domestic products in foreign markets. On top of that, many analysts started to speculate that the SNB will have to hike interest rates sooner rather than later, thus making the Franc even more attractive and stronger, as the inflation trend for recent month showed a serious upward pressure.

Today's significantly lower than expected consumer price index, however, brought some relief to the Swiss monetary authorities, as it came in at 0.1% month over month and 0.3% year over year, against expectations of 0.5% and 0.6% respectively.

After the number was released, the USD/CHF pair soared from 0.8730 to 0.8822, although it was unable to hold above 0.88 for long, retreating to 0.8790s where it currently trades. The EUR/CHF currency pair, meanwhile, jumped from 1.25 to 1.2680s and the CHF/JPY fell from 92.20s all the way to 91.49.