EUR/CHF rises as traders trim CHF longs ahead of ECB, SNB decisions

• EUR/CHF edges higher as traders trim Swiss Franc positions after safe-haven rally.
• Eurozone and German ZEW sentiment plunge, signaling a weaker growth outlook.
• Traders await ECB and SNB monetary policy decisions on Thursday amid shifting rate expectations.

The Swiss Franc (CHF) weakens against the Euro (EUR), with EUR/CHF edging higher after reversing intraday losses, despite soft Eurozone Economic Sentiment data.

At the time of writing, the cross trades around 0.9069, extending its recovery after briefly falling below the 0.9000 mark earlier this month, when safe-haven demand strengthened amid the escalating US-Israel and Iran conflict.

The recent uptick appears to be driven largely by position unwinding rather than a shift in underlying fundamentals. With geopolitical tensions still elevated, traders are becoming increasingly concerned about excessive Swiss Franc strength. The Swiss National Bank (SNB) has signaled a willingness to intervene in the FX market, which may be encouraging market participants to trim long CHF positions.

Investor sentiment across the Eurozone weakened sharply in March. The Eurozone ZEW Economic Sentiment index fell to -8.5 from 39.4, missing forecasts of 24, while Germany’s reading dropped to -0.5 from 58.3, also well below expectations of 38.7.

In Switzerland, Producer and Import Prices fell 0.3% MoM in February, compared to a 0.2% drop in January, missing expectations for a flat reading. . The annual rate dropped to -2.7% from -2.2%.

Attention now turns to the SNB and the European Central Bank (ECB) monetary policy decisions scheduled for Thursday, with both central banks widely expected to keep interest rates unchanged.

Traders will focus on forward guidance for signals on the future rate path, as the recent surge in Oil prices linked to disruptions in the Strait of Hormuz has heightened inflation concerns, prompting a hawkish repricing of interest rate expectations.

The inflation outlook remains divergent between Switzerland and the Eurozone, despite both being net energy importers. Higher Oil prices could weigh on Eurozone growth while keeping inflation elevated. In contrast, a stronger Swiss Franc helps reduce imported inflation by making foreign goods cheaper.

Against this backdrop, markets are leaning toward a more hawkish ECB outlook, with traders starting to price in a possible rate hike by July, while the SNB is expected to keep rates on hold through 2026.