Tuesday July 3, 2007 - 10:32:53 GMT
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INVESTICA Ltd - www.investica.co.uk
CPI data eases Swiss inflation fears
The consumer prices data will ease immediate inflation fears, but the National Bank will still oppose renewed franc losses.
The Swiss franc strengthened sharply to highs of 1.21 against the dollar on Monday and also pushed to 1.6460 against the Euro before a retreat back to 1.65. The UK terrorism alerts prompted some safe-haven franc buying, but the impact was measured. The Swiss currency drifted weaker in early Europe on Tuesday following the benign inflation data.
Swiss consumer prices rose 0.1% in June with the annual inflation rate rising to 0.6% from 0.5%. The National Bank will still be concerned over the inflation outlook, but the latest data will curb expectations of a more aggressive policy stance by the bank and the need for an interest rate increase before September.
The central bank, however, will still be very vigilant and will oppose renewed Swiss franc weakness given that underlying inflationary pressure has increased.
The Swiss currency should gain support on economic risk aversion as global credit conditions gradually tighten. Any evidence of increased stresses within the Euro-zone property sector would provide important franc support.
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