EUR/CHF extends gains as Swiss CPI stays soft, Eurozone Retail Sales disappoint

• EUR/CHF extends its recovery for a second consecutive day, supported by diverging macro signals.
• Swiss CPI remained unchanged at 0.2% in August while slipping 0.1% on the month, reinforcing disinflation risks.
• Investors now turn to Eurozone Q2 employment and GDP releases on Friday, both expected to show modest growth.

The EUR/CHF pair is attracting fresh buying interest for the second consecutive day on Thursday, with the cross edging higher to trade around 0.9381 during the European session. The move reflects a combination of softer Swiss inflation data and weaker-than-expected Eurozone Retail Sales, keeping investors reassessing the monetary policy outlook on both sides.

Switzerland's Consumer Price Index (CPI) held steady at 0.2% YoY in August, in line with forecasts but still reflecting persistently subdued price pressure. On a monthly basis, CPI slipped 0.1%, undershooting expectations for a flat reading. The figures underscore the disinflationary environment that the Swiss National Bank (SNB) has been battling, reinforcing market speculation that policymakers could lean more dovish if domestic demand weakens further.

In the Eurozone, July Retail Sales dropped 0.5% on a monthly basis, a sharper contraction than the expected 0.2% fall, and a notable reversal from June's 0.6% increase. On an annual basis, sales rose 2.2%, but this also fell short of the 2.4% forecast and marked a slowdown from the 3.5% growth recorded previously. The breakdown revealed declines in food and fuel consumption, while non-food products managed only a marginal gain. The soft print points to faltering household demand across the bloc, raising concerns about the sustainability of growth as inflation cools and external trade headwinds persist.

For the SNB, the latest CPI release highlights how stubbornly weak price pressure remains, keeping the bank firmly in accommodative territory after cutting its policy rate to zero in June. In contrast, the European Central Bank (ECB) faces a different challenge as Eurozone inflation edged up to 2.1% in August, with core inflation at 2.3% even as Retail Sales show weakening consumption, leaving policymakers in a cautious wait-and-see approach.

Adding to the picture, Switzerland's seasonally adjusted unemployment rate held steady at 2.9% in August, reinforcing the view that the labor market remains resilient even as price pressures stay muted. In the Eurozone, attention turns to Friday's second-quarter readings, where employment is expected to rise 0.1% from the previous quarter and 0.7% from a year earlier, while Gross Domestic Product (GDP) is seen expanding 0.1% on the quarter and 1.4% on the year.