EUR/CHF trims gains as ECB officials signal caution, focus shifts to Eurozone data
- EUR/CHF trims gains as traders digest fresh ECB remarks amid a light data calendar.
- De Guindos and Kazāks highlight elevated uncertainty and balanced risks to the outlook.
- Focus shifts to France and Spain inflation and Eurozone data due Thursday.
The Euro (EUR) trims part of its gains against the Swiss Franc (CHF) on Wednesday as traders digest remarks from key European Central Bank (ECB) officials amid a thin economic calendar on both sides. At the time of writing, EUR/CHF trades around 0.9330, pulling back from an intraday peak near 0.9350, its highest level since December 17.
ECB Vice-President Luis de Guindos, speaking at Spain Investors Day in Madrid, flagged elevated geopolitical tensions as a key downside risk to the growth outlook, noting that the high level of uncertainty may not be fully reflected in market pricing.
Guindos said inflation is currently around the ECB’s target and domestic demand has supported activity, but warned that global trade disruptions and broader financial stability risks continue to cloud the outlook.
Mārtiņš Kazāks, Governor of the Bank of Latvia and a member of the ECB’s Governing Council, said risks to the outlook remain on both sides and warned that uncertainty is still high, including the risk of non-linear shocks. He added that the ECB is delivering on its inflation mandate and that the central bank remains in a good place.
Overall, ECB officials continue to signal a steady and cautious policy approach, with little indication that the central bank is in a rush to raise interest rates.
ECB Governing Council member and Banque de France Governor François Villeroy de Galhau warned that France could enter a “danger zone” in the eyes of international investors if its budget deficit were to exceed 5% of GDP next year.
Figures released on Tuesday showed that France’s central government budget deficit narrowed to about EUR 155.4 billion in the first 11 months of 2025, from EUR 172.5 billion a year earlier.
Attention now turns to inflation data from France and Spain, alongside Eurozone Industrial Production and Trade Balance figures due on Thursday.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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