EUR/CHF rebounds from 11-month low amid ECB, SNB policy signals
- EUR/CHF recovers after briefly hitting an 11-month low near 0.9205 on Tuesday.
- ECB’s Guindos says current rate levels are “adequate,” signaling steady monetary policy ahead.
- SNB’s Schlegel expects inflation to rise slightly, pledges flexibility on monetary policy.
The Euro (EUR) steadies against the Swiss Franc (CHF) on Wednesday, recovering after briefly hitting an 11-month low near 0.9205 on Tuesday. At the time of writing, EUR/CHF trades around 0.9240, as the Euro stages a mild technical rebound from oversold conditions.
The recovery comes as traders digest a Reuters poll showing that the European Central Bank (ECB) is expected to hold its benchmark rate at 2.00% until at least 2027, reflecting a stable inflation outlook and moderate growth prospects. Economists surveyed anticipate Eurozone GDP growth of around 1.2% in 2025 and inflation close to 2.2%, suggesting policymakers are confident that current monetary settings remain restrictive enough to anchor prices.
The outlook offers some support to the common currency, which had been under steady pressure amid a strong Swiss Franc and cautious market tone.
European Central Bank (ECB) Vice President Luis de Guindos said earlier today that the current level of interest rates is “adequate” and that officials are “satisfied” with the present stance of borrowing costs. He emphasized that inflation risks are broadly balanced and that the Governing Council will continue to act on a meeting-by-meeting basis. The comments reinforce the perception that the ECB remains in a holding pattern, with no imminent plan to adjust rates in either direction.
Across the border, the Swiss National Bank (SNB) maintains a similarly cautious posture. The SNB kept its policy rate at 0.00% at its September meeting, reiterating that existing conditions remain appropriate to maintain price stability. In remarks published earlier today, SNB Chair Martin Schlegel said that inflation is expected to rise slightly in the coming quarters, noting that the central bank will continue to “observe the situation and adjust monetary policy where necessary.”
Schlegel added that planned US tariffs on certain pharmaceutical products could heighten downside risks for Switzerland’s export-oriented economy.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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