(05 OCTOBER 2017)DAILY MARKET BRIEF 1:Swiss CPI surprises to the upside

Switzerland’s consumer price index rose more than expected during the month of September as it increases 0.7% year-over-year as it reached 100.9 points, beating slightly median expectations of a 0.6% increase. On a month-over-month basis, the headline gauge rose 0.2%, matching expectation. The price increase was mostly driven by a price rise for clothing and footwear (+7.4%y/y).

The Swiss franc held steady following the release of the data. EUR/CHF rose a few pips to 1.1483 before reversing gains. USD/CHF did not react at all as the pair is mostly driven by development in the US, with ongoing speculation regarding Yellen’s potential replacement and Nonfarm payroll figures due for release tomorrow.

From our standpoint, the fact that the euro was able to hold recent gains against the Swiss franc suggests that investors are definitely not worried with the Catalan situation. Regarding the upside surprise in inflation reading, it could be tempting to conclude that the SNB will have to adjust its monetary policy as inflation pressures finally pick-up. In addition, we are still far from the SNB’s 2% inflation target, there is therefore plenty of room before calling for a tighter monetary policy.

By Arnaud Masset