The publication of the latest batch of economic data from Switzerland went largely unnoticed as investors await impatiently the results of the UK general election and Mario Draghi’s press conference later this afternoon. The EUR/CHF was treading water above the 1.0850 threshold, while USD/CHF stabilised at around 0.9650.
The unemployment rate eased to 3.2% (seasonally adjusted) in May, beating median forecast of 3.3%, while the previous month’s figure was downwardly revised to 3.2%. Investors also got a positive surprise on the inflation front as the headline measure printed at 0.5% y/y, well above estimates of 0.3%.
However, the HICP measure, which allows to compare inflation pressure with that of its European neighbours, shrunk 0.2% m/m in the previous month. On a year-over-year basis, the indicator eased to 0.4%, down from 0.7% in April. There is no reason to worry as core inflation continued to accelerate in May, highlighting the negative effect of the most volatile components, especially petroleum products.
We expect the economic conditions in Switzerland to continue to improve along with the European economy. However, upside pressures on the Swiss franc will take time to dissipate as investors are looking for sustained improvement in the EU before turning their back on the Swiss currency.
By Arnaud Masset