EUR/CHF rangebound amid diverging ECB and SNB policies
- The EUR/CHF continues to trade in a narrow range as diverging ECB and SNB policies limit directional bias.
- The IMF and the Swiss government both downgraded their 2025 growth outlooks due to global trade risks.
- Eurozone sentiment improves as the Sentix index jumps to 4.5 in July.
The Euro (EUR) struggles to gain traction against the Swiss Franc (CHF) on Monday, with EUR/CHF hovering around the 0.9350 level amid diverging monetary policies from the European Central Bank (ECB) and the Swiss National Bank (SNB), coupled with persistent safe-haven demand for the Swiss Franc.
The ECB is expected to pause its rate-cut cycle after eight consecutive reductions, citing persistent inflation pressures and a strengthening Euro. In contrast, the SNB adopted a more dovish stance in June, slashing its policy rate to 0% and signaling that a return to negative rates remains a possibility if deflation risks intensify.
On the macro front, the International Monetary Fund (IMF) and the Swiss government have both cut Switzerland's economic growth forecasts for 2025, citing concerns about global trade tensions. The IMF now forecasts the Swiss economy to expand by just 1.3% next year, down from its earlier estimate of 1.7%.
Meanwhile, recent inflation data paint a mixed picture—Swiss consumer prices dipped by 0.1% YoY in May, marking the first deflationary print in over four years, before inching back into positive territory in June with a modest 0.1% annual increase. This ongoing weakness in consumer prices has reinforced expectations that the Swiss National Bank (SNB) may maintain a dovish stance for longer, keeping the Franc underpinned by safe-haven flows and policy caution.
Across the Eurozone, the economic landscape appears to be stabilizing. The Eurozone Sentix Investor Confidence Index for July surged to 4.5 points, up sharply from 0.2 in June, marking its highest reading in over three years. The data suggest a broadening recovery and fading recession fears across the bloc, supported by improving economic indicators and easing inflation concerns. However, the ECB remains cautious, citing persistent external risks, including global trade uncertainty, which could weigh on the recovery. With inflation gradually moving toward the target, the ECB is widely expected to maintain a steady policy in the coming months, remaining data-dependent.
The persistent demand for the Swiss Franc as a safe-haven asset remains a key driver for EUR/CHF. Heightened geopolitical tensions and ongoing global economic uncertainty continue to push investors toward the Franc, reinforcing its appeal despite the Swiss National Bank’s (SNB) ultra-loose monetary policy. This structural demand for the CHF often offsets any upside potential for the euro, even when the European Central Bank (ECB) adopts a relatively more hawkish stance. As a result, the cross remains caught in a tug-of-war between diverging policy paths and risk-driven capital flows.
Swiss economy FAQs
Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation.
Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors.
As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.
Recommended Articles
