USD/CHF plummets 50 pips to break 0.9600 on strong Swiss Inflation, US Employment data eyed

• USD/CHF slumped 50 pips after Swiss inflation numbers surged in May.
• Swiss CPI rose past market consensus and previous readouts in May, fueling SNB rate hike concerns.
• Softer US Treasury yields also exert downside pressure ahead of the key US data.

USD/CHF collapses around 50 pips to form the daily low of around 0.9575 after hot Swiss inflation numbers for May, published on early Thursday in Europe. In doing so, the Swiss currency (CHF) pair not only snapped the previous two-day uptrend after the data but also drops the most in over a week on the daily basis.

Swiss Consumer Price Index (CPI) for May rose past 0.3% MoM forecast and 0.4% expectations to 0.7%. The YoY figures also rallied to 2.9% versus 2.6% expected and 2.5% prior.

The hot inflation raised doubts about the comments of Vice Chairman of the Swiss National Bank (SNB) Martin Schlegel who said that while inflation in Switzerland is low relative to other countries, it is not irrelevant, reported Reuters. It’s worth noting that SNB Chair Thomas Jordan previously said that "We are moving into an unpleasant phase for monetary policy,” per Reuters.

Not only the Swiss inflation data but softer US Treasury yields, which in turn weigh on the US dollar, also keep the USD/CHF bears hopeful. That said, the benchmark 10-year US Treasury yields dropped 1.4 basis points (bps) to 2.91% at the latest.

The pullback in yields contrasts the previous day’s upbeat data. That said, The US ISM Manufacturing PMI for April rose to 56.1 versus the 54.5 expected and the 55.4 prior. Further, the US JOLTs Job Openings eased below 11.8 prior readings but matched 11.4 market forecasts.

Looking forward, US ADP Employment Change for May, expected 300K versus 247K prior, will be eyed closely due to being the early signal for Friday’s US Nonfarm Payrolls (NFP). Also important to watch is the US Factory Orders for May bearing forecasts of a 0.7% increase compared to 2.2% in previous readouts.

Also read: US ADP Employment Change May Preview: The labor market recedes from center stage

Technical analysis

A clear downside break of the 50-DMA, around 0.9595 by the press time, directs USD/CHF bears towards May’s low of 0.9544.