Forex News – Swiss franc weakens after decline in consumer prices

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The Swiss franc fell sharply against both the dollar and the euro after data showed Swiss consumer prices fell in November. This will fuel speculation that the Swiss National Bank may raise the current 1.20 franc peg against the euro, which it had set on September 6 in an effort to curb franc strength.

EURCHF surged to a session high of 1.2417 from 1.2356 before the news. USDCHF rose to 0.9295 from 0.9228.

Switzerland’s CPI index fell 0.2 percent in November from a decline of 0.1 percent in October. Expectations were for 0.1 percent growth.

On an annual basis consumer prices fell 0.5 percent from a year earlier after falling an annual 0.1 percent in October.

The results will most probably add pressure on the Swiss central bank to raise its franc ceiling to protect the economy.

Swiss consumer prices may continue to fall as the economic slowdown deepens and the franc’s strength lowers prices of imported goods. Economists at UBS AG and Goldman Sachs Group Inc. have forecast the SNB to raise its franc cap of 1.20 versus the euro, when policy makers meet on December 15.