The Swiss franc edged higher against the euro and the dollar on Monday ahead of key industry and inflation data due this week which could add to speculation about more aggressive interest rate hikes in Switzerland.
The Swiss Purchasing Managers' Index, due later in the session, is likely to underpin the healthy state of the economy, but focus will be on tomorrow's consumer price data, which will be analysed for signs that the weak franc pushes up inflation.
The franc was slightly higher against the euro compared to Friday's close, trading at 1.6526 per euro. The franc was also slightly stronger against the dollar at 1.2203 per dollar. The franc has been under pressure as investors make use of the differential between Switzerland's relatively low short term benchmark interest rate of 2.50 percent and the 4.00 percent in the euro zone to fund carry trades by borrowing the franc.
The Swiss National Bank has warned at its recent policy meeting that a weakening of the franc could put price stability in danger and might warrant rate further increases. Economists see inflation edging higher in June. "We expect headline inflation to pick up on the back of higher oil prices and a weak Swiss franc," analysts at bank Sarasin said in a note. The median forecast in a Reuters poll at 0.7 percent, up from 0.5 percent in May.
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