Swiss franc jumps as inflation beat piles the pressure on the SNB

Dread from it. Run from it. It arrives all the same. That seems to be the story with inflation across the globe and it’s finally hitting the shores in Switzerland here.

SNB chief Thomas Jordan last month warned that the central bank is watching inflation closely and that they “stand ready to act if inflation solidified”. Whether or not today’s consumer inflation reading is significant in that regard will depend on their response but it is without a doubt a step towards that direction at least.

The SNB and BOJ are the two remaining major central banks left behind in the inflation battle. But as price pressures start to mount and become more evident and persistent, they may not be able to stay put for too long.

The market is already starting to sense that and the Swiss franc’s move in reaction to the data is telling.

USD/CHF has fallen quickly from 0.9625 to a low of 0.9575 and is now keeping around 0.9580 levels. A look at the daily chart:

Sellers are still holding their ground after the run since mid-May, keeping below the 50.0 Fib retracement level at 0.9630. And if the SNB starts to signal any potential shift in policy narrative, expect there to be major gains to be had for the swissie. It may not come today or tomorrow but with every  inflation 
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term data point moving higher, it is like a ticking time bomb.