Switzerland may experience deflation

Levels below 1.0350 turned out to be too low in EUR-CHF recently. However, a glance at the slightly longer term charts suggests that the pair is unlikely to notably exceed 1.05 either (this morning the market is trading slightly below this level). 

However, the consumer price data for May might provide some momentum. What matters in the end is how strong the deflationary momentum created by the end of the minimum exchange rate on 15th January is going to be, says Commerzbank. 

Most recently the data surprised repeatedly, but in different directions. The only thing that seems quite clear at the moment is that the yoy rate seems to continue falling. In April a fall of 1.1% was recorded, notes Commerzbank. 

For May consensus expects a fall of 1.3% in consumer price. The market's rationale is quite clear: the stronger prices are falling the more likely it is that the Swiss National Bank will intervene on the market preventing an appreciation through franc sales, adds Commerzbank.