EUR/CHF softens as Euro steadies after inflation surprise and Lagarde’s balanced remarks

• EUR/CHF eases from its highest level since September 5 as the Euro steadies after firmer inflation prints.
• Softer German Retail Sales and a rise in jobless claims initially pressured the Euro before stronger inflation reports shifted sentiment.
• ECB’s Lagarde stresses readiness to respond to inflation risks; SNB’s Schlegel signals stable conditions but flags ongoing uncertainty.

The Euro (EUR) regains ground against the Swiss Franc (CHF) on Tuesday, with EUR/CHF easing back after reversing early gains that had lifted it to its strongest level since September 5. At the time of writing, the cross is trading around 0.9355, failing to build on the previous day’s advance as the Euro steadies following firmer-than-expected inflation readings across the bloc’s largest economies.

The common currency came under pressure earlier in the day after a run of German data highlighted continued fragility in Europe’s largest economy.
Retail Sales fell 0.2% MoM in August, defying expectations for a 0.6% rise, while the annual pace slowed to 1.8% from 2.9% in July.

Adding to the soft tone, Germany’s Unemployment Change rose by 14K in August, twice the 7K increase forecast and a stark reversal from the 9K decline recorded in July, although the Unemployment rate held steady at 6.3%.

However, sentiment shifted after the release of national inflation reports that pointed to stickier price pressures.

Germany’s preliminary Consumer Price Index (CPI) rose 0.2% MoM in September, beating the 0.1% forecast and August’s 0.1% rise.
On an annual basis, headline CPI accelerated to 2.4% from 2.2% and above the 2.3% consensus, while the Harmonized Index of Consumer Prices (HICP) matched the monthly 0.2% increase and climbed to 2.4% YoY from 2.1%, overshooting the 2.2% estimate.

Inflation readings from the rest of the bloc presented a mixed but generally firmer picture.
Spain’s price growth remained solid and ahead of forecasts, while France’s annual inflation stayed relatively subdued, even as monthly prices dropped sharply. Italy’s EU-harmonized rate edged higher from the previous month.

ECB President Christine Lagarde, speaking on Tuesday, acknowledged that the central bank is “navigating a far more difficult environment than before” but stressed that it is “well placed to respond if the risks to inflation shift or if new shocks emerge that threaten our target.” She added that the risks to inflation appear “quite contained in both directions.”

On the Swiss side, Swiss National Bank (SNB) Chairman Thomas Jordan Schlegel said on Tuesday that indicators point to a stable situation and moderate growth, but he cautioned that uncertainty remains high and the SNB is closely monitoring the situation. He added that Swiss inflation is expected to rise slightly in the coming quarters.