EUR/CHF slides to two-week low as Swiss Franc strengthens on US-Switzerland trade optimism
- EUR/CHF extends losses, hitting its lowest level since October 31 as the Swiss Franc outperforms across majors.
- Franc gains traction after US President Trump confirms talks to lower US tariffs on Swiss exports from 39% to around 15%.
- Soft German ZEW data and cautious ECB commentary weigh on the Euro.
The Euro (EUR) weakens against the Swiss Franc (CHF) on Tuesday as the Franc shows relative strength among major peers amid optimism over a potential US-Switzerland trade deal. At the time of writing, EUR/CHF trades around 0.9270, its lowest level since October 31, down about 0.30% on the day, as investors favor the Swiss currency across the board.
The Franc’s latest advance comes after US President Donald Trump confirmed on Monday that Washington is “working on a deal to get their tariffs a little bit lower,” referring to import duties imposed on Swiss goods. “I haven’t set any number, but we’re going to be working on something to help Switzerland,” Trump said.
According to Reuters, the prospective agreement could reduce the current 39% tariff on Swiss exports to around 15%, with negotiations said to be in their final stages, though Swiss officials have so far declined to comment.
Adding to the Euro’s softness, German and Eurozone ZEW sentiment data offered a mixed signal on Tuesday. The German ZEW Economic Sentiment Index slipped to 38.5 in November, below forecasts of 40.0 and down from 39.3 in October. The Current Conditions Index improved modestly to -78.7 from -80.0, yet still undershot expectations of -77.5.
Meanwhile, the Eurozone ZEW Economic Sentiment Index rose to 25.0, beating the consensus estimate of 23.5 and the previous reading of 22.7, signaling a modest improvement in regional expectations despite lingering concerns over Germany’s slowdown.
Comments from European Central Bank (ECB) policymakers on Tuesday also did little to support the Euro. Several officials struck a balanced tone, suggesting that monetary policy is appropriately calibrated and that inflation risks are broadly even. ECB Executive Board member Frank Elderson said the “current rates level is appropriate,” adding that “inflation risks are balanced.”
Governing Council member Boris Vujčić noted that the Eurozone has experienced “slightly higher growth and inflation than forecast” and that “economically, we are in a good place.” ECB’s Olaf Sleijpen warned that “public spending can boost inflation in the short term,” while cautioning that “fiscal disparities can weaken policy transmission.”
Looking ahead, the economic calendar remains relatively light for Switzerland, with focus on Producer and Import Prices due Thursday. On the Euro side, attention turns to Germany’s final inflation figures on Wednesday, followed by the Eurozone Economic Bulletin and Industrial Production data on Thursday. The week concludes with key releases on Eurozone employment and seasonally adjusted Gross Domestic Product (GDP) on Friday.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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