A chill wind blows over EUR CHF

Snow fell yesterday in the region, but sleds and snowshoes won’t be making an appearance this weekend. If you’re mulling over your Sunday plans, you’ll find some suggestions at the end of this analysis.

In our previous analysis, we highlighted:

• The risk of the euro dragging the Swiss franc down, amid potential interventions by the Swiss National Bank.
• Financial experts’ concerns about the immediate future of the struggling European economy.
• Capital flows toward the U.S., spurred by Donald Trump’s promises of higher trade barriers and aggressive deregulation.
• Lingering questions about the Federal Reserve's interest rate policies, which seem increasingly difficult to manage. This, coupled with the specter of rising U.S. inflation driven by a forecasted trifecta of growth, increased consumer spending, and higher wages, adds to the uncertainty.

The identity of Donald Trump’s future Treasury Secretary remains a key unknown. One potential nominee, Kevin Warsh, a former Federal Reserve governor, could send a positive signal to markets. Trump’s team will likely push the Fed to lower interest rates to sustain the robust U.S. economic rebound. However, they’ll face an independent Fed with its own priorities, potentially focusing on combating a resurgence of inflation. If the U.S. raises trade barriers, it’s highly probable that its trading partners will retaliate.

On the Forex Markets

Currency markets have recently experienced heightened volatility. Traders, however, remain reluctant to liquidate their long positions on the U.S. dollar. Fears of an escalating conflict in Eastern Europe and gloomy Purchasing Managers’ Index (PMI) data from Europe are nudging the EUR/USD closer to parity. The Dollar Index, which measures the dollar’s performance against a basket of currencies, continues its upward trajectory from recent days. This is largely fueled by concerns that the Fed may hold rates steady in December. Meanwhile, the 10-year U.S. Treasury yield has hit 4.60%, nearing its peak above 5% last seen during periods of intense U.S. inflation.

Panic in Frankfurt

European Central Bank (ECB) governors are currently debating the impact of Trump’s promised trade barriers and their inflationary effects in Europe. The discussion revolves around the extent to which these barriers might influence European inflation. It’s worth noting that the ECB had planned a 150-basis-point easing of monetary policy by summer 2025. Such a move would widen the swap spreads between the euro and the U.S. dollar, further weakening the euro.

And What About the Swiss Franc?

Swiss financial experts and institutions are deliberating over Switzerland’s monetary policy options. Will the country lower interest rates to support business competitiveness despite the franc’s remarkable strength? Or will it conserve room for rate cuts to counter future inflation? Could the Swiss National Bank reduce its policy rate below 0.50%, intervene in forex markets, or even sell Swiss francs for euros to narrow the gap between the two currencies?

For now, the EUR/CHF exchange rate has dropped by 200 pips in just a few days, hitting support at 0.9250, where it struggles to bounce back. Francesco Pesole of ING Economics noted that a break below the 0.9320 support level this week undermined the EUR/CHF pair’s technical rebound potential. Back in August, he had already forecasted that the Swiss franc would stay near record-high levels.

This morning briefly saw a record, with EUR/CHF hitting 0.9215.

According to Mr Pesole, it will be critical for major central banks to avoid compressing swap spreads further, as this would lower bond yields and deter investors from such credit instruments. Regardless, Switzerland remains a beacon of stability for investors, maintaining its allure despite its central position in Europe.

Technical Analysis of the EUR/CHF Pair

Medium and Long-Term Trends
According to Adeline Armant, financial markets expert at HSBC, the EUR/CHF pair is showing predominantly bearish signals. Key technical indicators include:

• Stochastic Analysis: Comparing current exchange rates to historical values, stochastic indicators are flashing strong sell signals for the short and medium term, and overbought conditions in the long term.
• RSI (Relative Strength Index): Currently at 34.16, the RSI is slightly bearish, signaling mild selling pressure.
• MACD (Moving Average Convergence Divergence): This momentum indicator, based on the divergence between two exponential moving averages, is slightly negative at -0.001 this week. It suggests a weak sell signal for EUR/CHF, though the market developments this morning contradict this interpretation.
• Moving Averages: Both simple and exponential moving averages reinforce a bearish outlook.

Key Technical Support Levels
Analysts project the next technical supports for EUR/CHF at 0.9250 and 0.9215.

Should You Buy Euros or Swiss Francs?

Given these bearish signals, many experts recommend selling EUR/CHF. The Swiss franc continues to strengthen this week, with no visible intervention from the Swiss National Bank (SNB) — yet. Historically, the SNB has acted near the 0.9250 EUR/CHF level, which was a record low for the pair—until today.

Prior to the pandemic and the Ukraine crisis, the euro and the Swiss franc generally moved in tandem against the dollar. This is no longer the case. Bank of America advises a prudent risk management strategy for EUR/CHF trades in light of uncertain monetary policy decisions from central banks. We are entering a period full of unknowns, in both the figurative and mathematical sense.

Swiss Franc Exchange Rate Trends This Week 

EUR/CHF Performance

At the end of last week, EUR/CHF was trading at 0.9390. This week, the pair has dropped 100 pips, with EUR/USD trading at 1.0480. As forecast in previous analyses, EUR/USD appears on a trajectory toward parity.

Should this occur, Europe could face significant cost increases for imported commodities, exacerbating imported inflation. This raises the question: how can the European Central Bank (ECB) continue its rate-cutting agenda while supporting economic recovery?

EUR/CHF opened this week at 0.9355, 50 pips below last week’s closing level. After briefly peaking at 0.9364 on Wednesday morning, the pair slid to 0.9300 and currently trades at 0.9241 as of this writing. In just seven days, the euro has lost 150 pips against the Swiss franc, with no indication that Swiss authorities intend to stem the decline.

For cross-border workers converting Swiss francs to euros, this trend is delivering a windfall as salary payments approach. Optimism is evident at currency exchange offices ahead of payday.

 

USD/CHF Developments

The dollar tells a different story. Last week, USD/CHF ended at 0.8877. Initially, the Swiss franc weakened alongside the euro against the dollar, touching a low of 0.8800 USD CHF. However, it rebounded and stabilized.

As we explored in our previous analysis, "Will the euro drag the Swiss franc down with it?", the Swiss franc has managed to recover losses against the dollar. USD/CHF currently trades at 0.8893, but uncertainties remain for Europe. While markets across the Atlantic saw a pause after their post-election exuberance, geopolitical tensions continue to simmer.

These include nuclear threats in Eastern Europe and rumors of 100,000 North Korean troops being deployed to the front lines. Meanwhile, the ongoing conflict in the Middle East has yet to trigger a shock in oil prices.

Financial Markets and Commodities

$100,000 in the Sunshine

For those who had the foresight to invest in bitcoin or altcoins and hold onto them, the spotlight is yours. The star of the week is undoubtedly bitcoin, hovering near $99,200 USD (or 88,000 CHF at today’s rates). While it hasn’t quite reached the $100,000 USD milestone, cryptocurrencies are benefitting from the Trump administration’s rumored enthusiasm for digital currencies and speculation about a dedicated government position overseeing the sector.

While other asset classes remain largely cautious this week, bitcoin is currently trading at $98,800 USD (87,600 CHF). Observers are debating whether it has hit a resistance level or is gearing up for another rally. The situation may become clearer after the presidential inauguration.

For reference, in December, this analysis cited predictions from an expert forecasting bitcoin at $150,000 USD by year’s end. Could she have anticipated Donald Trump’s return to the White House?

On Wall Street and Beyond:

Nvidia: The Tech Titan Under Scrutiny

In the realm of tech stocks, Nvidia — the driving force of the U.S. economy — has left investors somewhat underwhelmed. With a staggering market capitalization of $3.6 trillion, the behemoth’s value matches that of all companies listed on the Paris Stock Exchange combined and surpasses the $2.9 trillion total capitalization of the cryptocurrency market.

Despite announcing stellar results this week — with annual revenue and profits doubling — Nvidia’s stock fell 2.5% during Wednesday’s session, reflecting investor uncertainty about near-term prospects. The transition from its older Hopper generation of chips to the new Blackwell models has seen demand far outstrip expectations. With significant growth potential still intact, Nvidia shares are currently priced at $147, or 130 Swiss francs for those betting on its inevitable ascent to the stratosphere.

U.S. Markets Stagnate, European Markets Falter

American markets have largely treaded water, while European indices have declined in six of the last seven sessions. Futures contracts, which previously priced in a 75% chance of rate cuts, now indicate a 50/50 split. A slight rebound yesterday offered some reassurance, with the world’s largest market capitalization calming jittery investors.

Swiss Market Index (SMI): A Quiet Week

The Zurich Stock Exchange has seen minimal volatility this week:

• Julius Baer gained 4.7%, buoyed by a 12% increase in assets under management, which have climbed to 481 billion CHF since the start of the year.
• Zurich Insurance rose 3%, exceeding its targets with a 9.5% growth rate and a 23% return on equity.
• Novartis raised its sales forecast, yet this failed to attract investors, leaving its stock flat. 

Energy Markets: Oil and Natural Gas

Natural Gas Prices

The escalation of the Ukraine conflict has reignited fears of aggressive Russian actions. Russia denies responsibility for submarine cable damage in Europe this week, but natural gas prices are already climbing. European reserves remain below their seasonal average.

Last winter (2022/2023), Europe successfully avoided shortages by bolstering reserves and stabilizing prices. This year, however, the story is different. While natural gas prices were at $2.90 per megawatt-hour last week, they closed at $3.20 yesterday.

For context:

• On October 22, prices were at $2.20, marking a 45% surge in just one month.
• With European reserves insufficiently stocked, the region faces a challenging winter.

Crude Oil Prices

• The price of Brent crude (North Sea) is currently $74.70 per barrel, up 3% week-on-week.
• Combined with the 3% appreciation of the U.S. dollar against the euro, European consumers are feeling the pinch.

For those earning Swiss francs, the stronger franc against the dollar offers some relief. If you fill up in Switzerland, particularly at stations with on-site currency exchange, you can convert your francs to euros and save both time and money.

Meanwhile, WTI crude (U.S. benchmark) is trading at $71 per barrel.

Gold Prices in USD and CHF

Gold is shining again, with classic coins like the Vreneli and Napoleon regaining their luster.

• A kilogram of gold now costs 76,200 CHF, while a Vreneli coin is priced at 446 CHF.
• This morning, gold is nearing the $2,700 mark, currently trading at $2,696 per ounce.

The precious metal’s resurgence highlights its enduring appeal amid economic uncertainty.

Trump’s Plan to Upend Institutions 

The new administration seems poised to take a revolutionary approach to governance, shaking up the established order. Speculation is swirling about dramatic policy shifts, such as dismantling the Department of Education to transfer its powers to state governors, abolishing the FBI, and creating a new ministry dedicated to digital assets like Bitcoin. These potential moves could disrupt global stability, leaving federal employees in a state of unease as they ponder whether their departments will be next under the guillotine.

Impact on Investments: A World in Flux 

Geopolitical Turmoil

Financial markets have reacted sharply to the political shifts in the U.S. since Trump’s victory. American indices have reached record highs, while European markets languish under uncertainty. The escalating Ukraine conflict has only deepened investor anxiety. Following President Biden’s decision to approve long-range weapons with a reach of up to 300 km inside Russian territory, Russia responded by launching an intercontinental missile capable of carrying thermonuclear warheads. Though the missile was unarmed, it served as a stark warning, with the Kremlin notifying the U.S. to avoid accidental escalation into nuclear conflict.

This tension, coupled with fears of an imminent collapse of Ukrainian defenses and the announcement of increased U.S. tariffs, has dampened sentiment in European financial markets.

Capital Flight

Investors are reallocating funds toward cryptocurrencies and U.S. markets, to the detriment of European equities. The agenda for the coming years in the U.S. includes massive deregulation, higher tariffs on Chinese and European imports, and tax cuts—contrasting sharply with countries like France, whose deficits now outpace even Italy’s. These developments, alongside inflation risks, have driven up U.S. Treasury yields.

A U.S. Advantage

Europe’s already strained economy is likely to face further setbacks. Stagnant growth could become the norm, while deregulated American businesses gain a competitive edge. In Europe, declining growth may prompt interest rate cuts sooner rather than later, benefiting prospective homebuyers with lower mortgage rates. However, for fixed-income investments, the outlook remains bleak on this side of the Atlantic.

Switzerland: Shielded or Vulnerable?

EUR/CHF Outlook

The Swiss National Bank (SNB) appears to be letting the Swiss franc follow the U.S. dollar’s trajectory. As the euro slides against the dollar, the franc mirrors this movement against the euro. It seems the dollar’s exchange rate carries more weight in SNB decisions than the euro, despite the euro’s significance in trade.

If you’re planning to exchange Swiss francs for euros, act swiftly—compare rates through dedicated apps to ensure you secure the best deal.

For now, a robust U.S. dollar continues to delight forex traders, making the EUR/CHF pair an intriguing case for analysis.

Weekend Activities in the Region 

The Marmite Tradition

Looking for something uniquely Swiss this weekend? How about celebrating the Geneva tradition of La Marmite de l’Escalade? If you’re not a Geneva native, you might recognize the chocolate and marzipan cauldrons lining store shelves during the holiday season.

This weekend, La Bonbonnière Chocolaterie invites you to their chocolate school to create your very own marmite.

• Where: Rue Pierre-Fatio 15
• When: Saturday at 10:00 AM for marmite making, and at 5:00 PM for a chocolate bomb creation workshop.

Indulge your sweet tooth while immersing yourself in a cherished local custom!

Christmas Markets and Weekend Festivities

The holiday season kicks off this weekend with Christmas markets welcoming visitors of all ages. Among the highlights is the "Noël au Quai" market. Meanwhile, in Verbier, the Polaris Festival invites you to groove to the beats of world-class DJs on Friday and Saturday. More details are available at Polaris Festival.

Closer to home, Montreux’s Christmas Market, renowned as one of Europe’s most enchanting, is ready to dazzle you. Featuring nearly 170 exhibitors, this magical experience is a testament to Montreux’s flair for holiday festivities.

Special Offers for Currency Exchange

Before we sign off, don’t forget the Ben S Exchange promotion! All users of the Ben S Change Club app are eligible for an exclusive deal: 10 pips off on your currency exchange transactions, in addition to benefiting from the best rates in the market through the Ben S Shop Change app.

Wishing you a fantastic weekend!

X.C.

Nata Bene: Translated with the help of AI