Swiss Franc Near April Lows on Soft Inflation

The Swiss franc traded at 0.79 per USD, near its weakest since early April, after softer-than-expected inflation data reduced expectations for a Swiss National Bank rate hike this month. Annual inflation in May held at 0.6%, its highest since December 2024 but below the 0.8% forecast. Inflation had been nearly flat at the start of the year but rose slightly after strikes on Iran in late February. Switzerland’s lower reliance on oil and gas, thanks to its Alpine hydropower and nuclear energy, shields it more than the eurozone. SNB Chairman Martin Schlegel noted on Wednesday that, despite recent inflation upticks, medium-term pressures remain largely unchanged. Investors now expect the bank to maintain its key rate at 0% through year-end. Meanwhile, investors monitored Middle East developments: Iran claimed it targeted a US command ship in the Gulf of Oman, the Republican-led House voted to halt US military action against Iran, and Israel and Lebanon agreed to a conditional ceasefire.

The Swiss franc firmed to 0.78 per USD, reaching the highest since May 12, as optimism about a potential deal between the US and Iran reduced demand for the greenback as a safe-haven. Signs emerged that the US and Iran were moving closer to reach a long-awaited peace deal, though more steps are needed until a final agreement, with key sticking points including the Strait of Hormuz and Iran’s nuclear programme. Meanwhile, Swiss National Bank (SNB) Vice Chairman Martin Schlegel said recently that although Swiss inflation currently remains within the SNB’s price stability range, the central bank maintains a strong readiness to intervene in foreign exchange markets if necessary. Swiss inflation rose to 0.6% in April, its highest level in 16 months, driven by rising energy costs linked to the war in the Middle East. The Swiss franc has been benefiting strongly from safe-haven inflows amid prolonged geopolitical tensions and global trade uncertainties.

The Swiss franc traded around 0.78 per USD, near record highs, as investors evaluated the Swiss National Bank’s policy outlook following the latest inflation data. Ongoing safe-haven flows also lent support. Swiss inflation rose to 0.6% in April, its highest level in 16 months, driven by rising energy costs linked to the war in the Middle East. The increase marked a second consecutive acceleration and pushed the headline inflation rate above the 0.5% average projected by the SNB for this year and 2027 at its last policy meeting in March. Although the central bank expects the spike in costs to be temporary, with minimal change to medium-term price pressures, this offers breathing space for policymakers, who were previously confronting subdued inflation before the Iran war, driven by the strength of the franc. SNB Chairman Martin Schlegel said last month that higher energy prices should lift inflation further in coming quarters, while growth is likely to remain subdued in the near term.