The Swiss franc strengthened sharply against the euro and U.S. dollar on Thursday after Switzerland’s August inflation data exceeded expectations, reaching the highest level in two years.
The euro fell to 0.9395 francs by midday, down from 0.9410 in the morning, while the U.S. dollar declined to 0.8097 francs from 0.8114 earlier. The franc’s gains came immediately after the inflation figures were released, though some of the appreciation was pared back during the morning session.
Swiss inflation rose to 1.7% year-on-year in August, up from 1.3% in July and the highest since August 2022. The acceleration was driven primarily by energy prices, particularly heating oil, which surged 20% month-on-month. Analysts noted the increase was concentrated in imported inflation rather than broad-based price pressures.
The data has raised questions about the Swiss National Bank’s (SNB) policy stance. Thomas Gitzel, chief economist at VP Bank, said the combination of higher inflation and strong second-quarter GDP growth could force the SNB to act sooner than expected. "With this set of data, a slightly negative SARON rate may no longer fit. The SNB needs to adjust," he said, adding that a December rate hike could no longer be ruled out.
Arthur Jurus, CIO at ODDO BHF, took a more measured view, attributing the inflation spike largely to energy costs. He suggested the SNB would likely proceed cautiously at its September meeting, though rising imported inflation and heating oil prices would require close monitoring in the coming months.
Elsewhere, the euro-dollar pair remained relatively stable at 1.1603, with investors focusing on Friday’s U.S. jobs data, which could influence the Federal Reserve’s mid-September rate decision.
The Japanese yen also strengthened, with the dollar-yen rate falling to 156.49 from nearly 160 yen the previous day. Market speculation grew over the possibility of another currency intervention by the U.S. after Japan’s finance ministry stepped in earlier this month to support the yen for the first time in over a decade. The intervention, which involved selling euros, drew criticism from European officials. A 0.25 percentage point rate hike by the Bank of Japan on September 18 is fully priced in, further supporting the yen’s gains.
