Swiss Franc Soars on SNB Warning, Jobless Claims

 | Jun 09, 2023 04:13AM ET

  • SNB’s Jordan hints at a June rate hike
  • US jobless claims jump
  • Swiss franc climbs 1.2%

    • The USD/CHF is showing limited movement on Friday, trading at 0.8998. On Thursday, the Swissie surged higher, gaining 1.2%.

    h2 SNB’s Jordan signals more rate hikes are coming/h2

    It seems that Swiss National Bank head Thomas Jordan doesn’t miss an opportunity to warn the markets that inflation is too high in Switzerland. Just a week ago, Jordan stated that if core inflation became entrenched above 2%, it would be difficult to bring it back below this level. Jordan was even more explicit in his remarks on Thursday, warning that inflation “is more persistent than we initially thought” and that with rates at a low 1.5%, it wasn’t a good idea to keep rates low and face higher inflation later.

    Jordan’s remarks were a clear signal that the SNB plans to raise rates at the June 22nd meeting. The Swiss franc jumped after the comments, climbing 1% and punching above the symbolic 0.90 line for the first time in two weeks.

    Like other central banks, inflation has become the number one priority for the SNB, even though inflation is much lower than in the other major economies. The SNB, once known for its negative rates, has been aggressive, raising rates by 225 points in the current tightening cycle. Higher rates have pushed the Swiss franc higher, which the SNB would rather avoid as an expensive Swiss franc hurts the export sector. Still, this is the price the central bank is willing to pay in order to curb inflation back to below the 0-2% target.

    h2 US jobless claims jump/h2

    In the US, unemployment claims were higher than expected, leading to the US dollar beating a hasty retreat against its major rivals. It’s only one report, but there have been signs of cracks in the labour market, such as a spike in the unemployment rate. The Fed meets next week, and the unemployment claims could provide support for a pause, which is weighing on the US dollar.