The rally in the Swiss franc has started to show in effect on the economy and the signs of deflation threats may have started to materialize explaining the strong comeback from the SNB.

The Producer & Import Price Index in August slumped 1.2% deepening the drop from 0.7% decline in July and below the expected drop of 0.4%. On the year prices fell 1.9% following 0.6% drop and also deeper than the expected drop of 1.1%.

We can see the rising pressure on the SNB and deflation threats which prompted stronger reaction from the Swiss National Bank with the beginning of this month to act against the rapid currency appreciation that is threatening economic stability by recently setting 1.20 floor for the EUR/CHF to limit the excessive currency gains.