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Euro-Swiss Franc Exchange Rate Steadies with European Central Bank (ECB) Policy Decision Imminent

March 7, 2019 - Written by Ben Hughes

As Eurozone data comes in slightly better than forecast this week, higher demand for safe haven currencies like the Swiss Franc has done little to push the Euro to Swiss Franc (EUR/CHF) exchange rate lower. Investors have been too hesitant to make major moves on the pairing ahead of today’s anticipated European Central Bank (ECB) policy decision.

Since opening this week at the level of 1.1358, EUR/CHF has fluctuated fairly widely. EUR/CHF briefly slumped to trend near a low of 1.1320 on Monday, which was the lowest level for the pairing since early February. EUR/CHF has since recovered though, and at the time of writing today was trending just above the week’s opening levels and in the region of 1.1361.

Despite stronger Eurozone economic data in recent sessions, rising market demand for safer currencies amid fresh geopolitical jitters has limited the Euro’s potential for gains.

Euro investors are also anxiously anticipating the European Central Bank’s upcoming policy decision, in which analysts predict it may hint at fresh stimulus policy.

EUR Exchange Rates Jittery on Speculation that ECB Stimulus is On the Way

The Euro held its ground against the Swiss Franc today, as investors were hesitant to move too much on the shared currency ahead of today’s anticipated European Central Bank (ECB) policy decision.

Due to data showing that the recent Eurozone economic slowdown has been even worse than expected, there is anxiety in markets that the European Central Bank will be pressured to take a more dovish stance due to the slowed Eurozone economic outlook.

Concerns have risen that the ECB will indicate that it will not hike Eurozone interest rates at all until next year at the earliest.

There is also mounting speculation over the last few days that the bank will signal that it could prepare fresh stimulus measures for the Eurozone economy in order to prevent the slowdown from worsening.

Expectations for a more dovish stance from the ECB have made investors hesitant to buy the Euro.

According to Thu Lan Nguyen, Currency Analyst at Commerzbank:

‘The market has already priced in a lot. We don’t expect the ECB to make any changes but signal that changes are imminent,

The risks are that the Euro gives up a bit more. The risks are to the downside.’

CHF Exchange Rates Firm as Safe Haven Demand Rises

The Euro has been unable to secure much of a recover, due to some resilient market demand for the safe haven Swiss Franc.

As a safe haven currency, the Swiss Franc is appealing to investors in times of global market uncertainty.

This means that the recent uncertainties in US-China trade negotiations and fresh geopolitical tensions between the US and North Korea have bolstered Swiss Franc demand.

News of slower than expected in both China and Australia have also made investors hesitant to take risks, further bolstering safe haven demand.

Still, the Swiss Franc has not been as appealing as other safe haven currencies like the US Dollar (USD) and Japanese Yen (JPY) due to a lack of notable supportive Switzerland news in recent sessions.

Switzerland’s February unemployment rate report met expectations, improving from 2.8% to 2.7%.

EUR/CHF Exchange Rate Forecast: European Central Bank Decision in Focus

Unless there notable shifts of market risk-sentiment in the coming sessions, the Euro to Swiss Franc exchange rate is most likely to be driven by today’s European Central Bank (ECB) policy decision as well as other upcoming Eurozone ecostats.

The tone the bank takes in its March policy decision is vital to the Euro outlook, as the bank could indicate how soon a Eurozone interest rate hike could be, as well as indicate how likely further stimulus measures are.

If he bank does indeed hint that there will be no rate hike in 2019 and signals that more stimulus is on the way, the Euro to Swiss Franc exchange rate could tumble in the coming sessions and end the week lower.

Eurozone data due in the coming sessions has the potential to influence EUR/CHF as well. Friday’s German factory orders data and Monday’s German trade balance stats could be particularly influential.

As for the Swiss Franc, it is likely to react to developments in US-China trade negotiations, and other geopolitical news could also influence the Euro to Swiss Franc exchange rate.
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