- The EUR/CHF continues to quote in a narrow range, since the divergent policies of the ECB and SNB limit directional bias.
- The IMF and the Swiss government have reduced their growth prospects by 2025 due to the risks of global trade.
- The feeling in the Eurozone improves as the Sentix index jumps to 4.5 in July.
The euro (EUR) struggles to gain traction against the Swiss Franco (CHF) on Monday, with the EUR/CHF around the level of 0.9350 in the midst of divergent monetary policies of the European Central Bank (ECB) and the Swiss National Bank (SNB), along with a persistent demand for safe refuge for the Swiss Franco.
The KEEPS is expected to be its cycle of feat cuts after eight consecutive reductions, citing persistent inflationary pressures and a strengthened euro. In contrast, the SNB adopted a more Dovish posture in June, reducing its 0% policy rate and pointing out that a return to negative rates remains a possibility if deflation risks intensify.
In the macroeconomic front, the International Monetary Fund (IMF) and the Swiss government have cut the economic growth forecasts of Switzerland by 2025, citing concerns about global commercial tensions. The IMF now predicts that the Swiss economy will expand only 1.3% next year, below its previous estimate of 1.7%.
Meanwhile, recent inflation data paints a mixed panorama: Swiss consumer prices fell 0.1% year -on -year in May, marking the first deflationary impression in more than four years, before re -entered into positive territory in June with a modest annual increase of 0.1%. This continuous weakness in consumer prices has reinforced the expectations that the Swiss National Bank (SNB) can maintain a Dovish posture for a longer time, keeping the Franco supported by safe refuge flows and caution in politics.
Through the Eurozone, the economic panorama seems to be stabilized. The Inverter’s Trust Index of the Eurozone for July was shot at 4.5 points, a considerable increase from 0.2 in June, marking its highest reading in more than three years. The data suggest an expanded recovery and a fading of the fears of recession in the block, backed by economic indicators in improvement and inflation concerns. However, the ECB is still cautious, citing persistent external risks, including global commercial uncertainty, which could weigh about recovery. With inflation gradually moving towards the target, the ECB is expected to maintain a stable policy in the coming months, being dependent on the data.
The persistent demand of the Swiss Franco as an active refuge remains a key engine for the EUR/CHF. Increased geopolitical tensions and continuous global economic uncertainty continue to push investors towards the Franco, reinforcing their appeal despite ultra flexible monetary policy of the Swiss National Bank (SNB). This structural demand for the CHF often compensates for any bullish potential for the euro, even when the European Central Bank (ECB) adopts a relatively more Hawkish posture. As a result, the cross continues to be trapped in a struggle between divergent paths and capital flows driven by risk.
Swiss economy – Frequently asked questions
Switzerland is the largest economy in the European continent in terms of gross domestic (GDP) nominal. If measured by GDP per capita (a wide measure of the average standard of living), the country is among the highest in the world, which means that it is one of the richest countries in the world. Switzerland tends to be in the first places of world classifications on standard of living, development, competitiveness or innovation rates.
Switzerland is an open and free market economy based mainly on the services sector. The Swiss economy has a strong export sector and the neighboring European Union (EU) is its main commercial partner. Switzerland is an important watches exporter and houses important companies in food, chemistry and pharmaceutical industries. The country is considered an international fiscal paradise, with corporate tax rates and significantly low income compared to its European neighbors.
As a country of high income, the growth rate of the Swiss economy has decreased in recent decades. Even so, its political and economic stability, its high levels of education, top -level companies in various industries and their fiscal paradise status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franco (CHF), which has historically remained relatively strong in front of its main monetary pairs. In general, a good performance of the Swiss economy – based on high growth, under unemployment and stable prices – tends to appreciate the CHF. On the contrary, if the economic data suggests to a weakening of the impulse, the CHF is likely to depreciate.
Switzerland is not an exporter of raw materials, so, in general, their prices are not a key factor for the Swiss Franco (CHF). However, there is a slight correlation with gold and oil prices. In the case of gold, the condition of the CHF as an active refuge 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. In the case of oil, a document published by the Swiss National Bank (SNB) suggests that the increase in oil prices could negatively influence the assessment of the CHF, since Switzerland is a net fuel importer.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
