The Euro to Swiss Franc (EUR/CHF) exchange rate recorded losses in Thursday’s European session ahead of European Central Bank (ECB) announcements.
The Single Currency could drop on any move by the ECB today; if President Mario Draghi suggests that the central bank will be taking on quantitative easing (QE) the Euro exchange rate could tumble. Conversely if the announcement see’s the central bank do nothing the Euro could still fall.
Either way, Thursday could be an extremely interesting day for Euro trading. ECB Consumer Confidence figures will be out later in the session.
Earlier… The Euro to Swiss Franc (EUR/CHF) exchange rate extended losses as Wednesday’s European session continued and European Central Bank (ECB) speculation heightened.
The Euro hit an 11-year low versus the US Dollar (EUR/USD) ahead of the ECB’s policy announcement on Thursday which could see the central bank reveal a massive sovereign bond buying program.
As many investors expect the ECB to begin quantitative easing (QE), economists have forecast declines in the Euro.
Currency strategist Peter Kinsella commented: ‘These rumours are consistent with what the ECB has to do–once that’s out we’ll see the Euro come under long-lasting depreciation pressure in the next three to six months. From a fundamental point of view, there’s no reason to buy the Euro. You have a central bank which is actively looking to weaken the currency and it’s pretty much all you need to know.’
Earlier… The Euro to Swiss Franc (EUR/CHF) exchange rate began Wednesday’s session trending lower ahead of ZEW’s Swiss Expectations Survey.
The index resided at -4.9 in December and any improvement could offer some support to the Franc.
The Euro to Swiss Franc (EUR/CHF) exchange rate was bearish in Tuesday’s session despite ZEW’s German and Eurozone Economic Sentiment Surveys showing an increase in confidence.
Eurozone figures increased from 31.8 to 45.2—a six-month high while German sentiment experienced a massive jump from 34.9 to 48.4—an 11-month high.
Some economists may suggest the figures are surprising given weak Eurozone fundamentals and the upcoming Greek elections signalling the possibility of a Greek exit from the Eurozone.
ZEW President Clemens Fuest commented: ‘The new year started with turmoil in the capital markets. News of the upcoming parliamentary elections in Greece and the Swiss National Bank’s decision to abandon the Euro cap on the Franc’s value have led to strong stock market fluctuations.’
‘However, this seems not to have impressed ZEW’s financial market experts with regard to their expectations for the German economy. Instead, decreasing crude oil prices and a depreciating Euro have contributed to a further gain of the indicator.’
Meanwhile, the Swiss Franc exchange rate has remained strong against the Pound (CHF/GBP) and US Dollar (CHF/USD) as well as the Euro (CHF/EUR) after the Swiss National Bank’s announcement last week.
The market was caught off guard when the SNB announced that it was relinquishing the 1.20 tie between the Euro and the Swiss Franc (EUR/CHF) exchange rate. Since the initial announcement, the Swiss Franc has maintained around 20% of its gains versus the Single Currency. Investors are speculating that the European Central Bank (ECB) will introduce large-scale stimulus measures such as quantitative easing (QE) this Thursday.
Strategist Simon Derrick commented: ‘Given what we know about the impact of QE programs on currencies it seems reasonable to suppose that the start of this week will see the Euro come under significant pressure against a wide range of currencies.’
Euro to Swiss Franc (EUR/CHF) Exchange Rate Forecast
Monday saw French President Francois Hollande state that the ECB would be announcing QE on Thursday, increasing speculation regarding the central bank’s intentions.
Barclays stated that the expectations of QE were so high that ‘without decisive actions, the ECB risks failing on its mandate to deliver on the inflation target and financial stability.’
Wednesday will see the release of Swiss Money Supply and ZEW Survey Expectations figures, which could boost the Swiss Franc if favourable.
The Euro to Swiss Franc (EUR/CHF) exchange rate is trending in the region of 1.0114 with market movement of -0.90%.
