The Euro to Swiss Franc (EUR/CHF) exchange rate softened by around -0.38% on Tuesday morning.
After German Producer Prices data declined in December, on both a monthly and yearly basis, the shared currency softened versus the majority of its most traded peers. The single currency is likely to continue trending lower ahead of economic sentiment data due later of Tuesday morning.
The Swiss Franc, meanwhile, softened fractionally against many of its major peers as traders pare back the large gains seen in the aftermath of the Euro cap removal.
The Euro to Swiss Franc (EUR/CHF) exchange rate is currently trending in the region of 1.0176.
Yesterday…
The Euro to Swiss Franc (EUR/CHF) exchange rate rallied by around 2.38% on Monday morning.
After having priced in a large declination in preparation for an extensive European Central Bank (ECB) quantitative easing programme, the shared currency strengthened on Monday. This can be attributed to traders fearing that opposition from Germany will cause the ECB to dilute their intended opening amount.
The Swiss Franc, meanwhile, struggles from the fallout of the well documented removal of the Euro cap. This will please the Swiss National Bank (SNB) after a long-term struggle with overvaluation. Swiss data has had minimal impact under the weight of the SNB’s decision.
The Euro to Swiss Franc (EUR/CHF) exchange rate is currently trending in the region of 1.0172.
Euro (EUR) Exchange Rate Strengthens on Overdone Decline
As explained above, after traders priced-in aggressive ECB intervention the common currency recovered some of its losses. With expectations mounting that German opposition will not allow the ECB to add liquidity to the extent they wish, a watered-down opening amount gives the single currency higher purchase power.
‘There are a series of trade-offs involved in [designing QE] and whatever is announced will probably not satisfy everyone,’ said Ken Wattret, economist at BNP Paribas. ‘Any adverse impact stemming from a reluctance to mutualise risk could be offset by a strong signal that the ECB is willing to buy in large scale in order to raise inflation expectations.’
The Euro to Swiss Franc (EUR/CHF) exchange rate dropped to a low today of 0.9869.
Swiss Franc (CHF) Exchange Rate Dives on Euro Cap Removal
With the hangover from the SNB’s surprise decision to remove the Euro cap still raging, the Franc extended losses versus its major peers on Monday. This is likely to please the SNB after a long-term battle with overvaluation. However, with the Euro declining in tandem, the Franc remains historically overvalued versus the common currency.
‘Around parity the Swiss Franc appears more overvalued versus the Euro than at any other time in the last 30 years, and the strength of the Swiss Franc is likely to put significant strain on the Swiss economy,’ said Beat Siegenthaler, a currency strategist, adding that he nonetheless assumes that the exchange rate will ‘fluctuate around parity for the coming months.’
Euro to Swiss Franc (EUR/CHF) Exchange Rate Forecast to Strengthen
Given that domestic data is having minimal impact on the Euro to Swiss Franc (EUR/CHF) exchange rate, the shared currency is likely to continue trending higher versus the Franc on Monday. With speculation dictating currency positions, however, there is the possibility for volatility.
The Euro to Swiss Franc (EUR/CHF) exchange rate climbed to a high today of 1.0082.
