EUR/CHF in a Straitjacket

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The week was rich in events. Donald Trump creating the "buzz," as usual. The president's inflationary program, not yet president but already president, will likely lead to less binary repercussions than expected, but the initial effects of his very noticeable arrival are being felt. 

Swiss Franc Exchange Rates Under Control

At the end of 2024, the Swiss National Bank drastically reduced its key interest rates, surprising everyone or almost everyone. This has marked a temporary halt to the gradual decline of EUR CHF, showing investors and speculators that it would not allow the Swiss franc to maintain its safe-haven role without control. Through its monetary policy, the SNB demonstrates its capabilities and protects the Swiss economy. It can afford to do so due to very low inflation, which is decreasing month by month. Since the Swiss National Bank's meeting in December, which allowed it to prevent the Swiss franc from slipping towards 0.9300 EUR CHF, it has managed to keep the rate around 0.9400 EUR CHF. Experts still do not know if the SNB intervened in the foreign exchange market with the help of hundreds of millions of Swiss francs, by buying foreign currencies and converting Swiss francs into euros or dollars. But it has probably deterred all kinds of speculators.

The institution still has room, but can it risk causing deflation? Switzerland is a unique case. The SNB is able to control the Swiss franc's exchange rate with its hundreds of billions of Swiss francs in reserves, far more than most central banks and states can on their currencies.

Switzerland still has room before reaching a zero or negative key interest rate, without the risk of inflation, and the probability that the SNB will further reduce its rates in March is high. Unless the Swiss franc's exchange rates give ground against the euro and the US dollar.

EUR CHF Week

EUR CHF

The Swiss franc is losing its appeal for speculators. This does not protect it from carry trade and its effects.

EUR CHF started its trading week with an exchange rate of 0.9365 EUR CHF. Later that same afternoon, the pair reached its weekly support with a minimum exchange rate of 0.9340 EUR CHF. Then, the pair achieved an astonishing stability throughout the week, despite encouraging economic and geopolitical events maintaining an average exchange rate hovering around 0.9400 EUR CHF, although the trend remained below this level for the rest of the week.

It remains difficult to estimate the Swiss franc's ability to escape the stabilizing actions of the National Bank, but it has anchored the Swiss franc's exchange rates against the euro and allowed the dollar to drift upwards, in order to facilitate the consolidation of export companies' commercial results.

At the time of writing, the exchange rate of the franc against the euro is 0.9391 EUR CHF.

USD CHF

The dollar has experienced more volatility, however. The gaps between its high and low have reached 100 pips. The greenback was trading at 0.9164 USD CHF at the opening before hitting resistance on Monday at 5:00 PM at 0.9190 USD CHF. On Wednesday, following data from the United States, the pair touched 0.9090 USD CHF.

At the time of writing, the Swiss franc to dollar conversion is at a rate of 0.9116 USD CHF.

Markets and Commodities

The Nasdaq gained 500 points this week, reaching 19,461 points. And +3% for the S&P 500. American indices benefited from US inflation figures that were slightly better than expected. A "slightly" which, when multiplied by billions, soothes investors' hearts. The 10-year US Bond fell to 4.66% after recently brushing past the psychological threshold of 5%. Positive announcements in the United States allowed European financial centers to close significantly higher. The week is in the green despite a slowdown in the luxury sector, which is suffering from its exports to China and Russia. Notably, LVMH still ended yesterday's session with a 9% increase.

SMI

In Switzerland, the same sector is booming, in contrast to the old continent. It is still Compagnie Financière Richemont that dominates the Swiss market, with solid end-of-year results. The stock that was highlighted in our previous analysis on the EUR CHF pair, in the SMI recommendations section, announces a 10% increase this week instead of the 1% predicted by analysts. If you followed Bank of Scotland's recommendations in our article last week, you would have gained 16% yesterday and over the week. 18% over the month. Better than bitcoin, isn't it? And less risky. The company's revenues have far exceeded market expectations and place the stock at 161.80 Swiss francs.

Geberit, impacted by a 'underweight' recommendation from Morgan Stanley, lost 3%, Holcim -3.60% yesterday, while Swiss Life and Logitech gained more than 2% over the week. All following the evolution of recommendations from major rating agencies. Finally, Partners Group, whose assets under management increased by 7%, only gained one percent over the week.

The SMI reached 11,982 points for the week, an increase of 2.5%.

Hydrocarbons

The price of a barrel of Brent crude in the North Sea has increased by $10 since the holidays. A barrel of oil in London trades at almost $82. Expensive oil and a strong dollar will damage consumers' portfolios. This could reignite inflation. A cessation of fighting in Ukraine could, on the other hand, lower the bill, although European states have imposed new sanctions against the 200 so-called "phantom" ships of the Russian oil and gas fleet. The 5.4% drop in electric car registrations, potential sanctions against Iran with Donald Trump's return, are all factors putting pressure on prices.

Gas follows the same logic.

Gas is Hot!

From $3.93 per MWh, gas continues its ascent and is trading at $4.08 this morning. It was $2.20 only three months ago and is on track to double. If you are struggling to pay your bills, using a pullover at home is necessary.

Gold in the Stock Market

With an ounce of gold holding steady at $2,720, gold is close to its records. As of yesterday, a one-kilogram bar was priced at 79,185 Swiss francs at the London Stock Exchange, which is the benchmark, while a Vreneli and a Napoleon coin were trading around 457 Swiss francs, showing a slight increase since our last analysis. Gold is influenced by the rises and falls in central banks' interest rates, as well as the exchange rates of the Swiss franc and foreign currencies. The yellow metal, much less volatile than cryptocurrencies and risky assets, remains a relatively safe haven.

Cryptocurrencies

One bitcoin is now worth $101,350, or 92,390 Swiss francs at today's exchange rate. After a significant pullback of these values, near $90,000, the main cryptocurrency benefits from the prospect of Donald Trump arriving at the White House and establishing his digital currencies secretariat.

We notice the performance of Ripple, XRP, the third largest capitalization in the sector with a market cap of $191 billion: XRP has gained 44% in one week!

This is now more profitable than trading with the EUR CHF exchange rates.

Traders' Corner:

The intra-day bias of EUR CHF is considered neutral against a backdrop of ongoing deep exchanges. A corrective rebound to 0.9350 EUR CHF could extend upwards. However, the Fibonacci curve shows resistance at 0.9470 EUR CHF, which may limit this rise. If the pair falls, a clear break at an exchange rate of 0.9330 will prove that the correction is irreversible, leading the bearish bias towards a support level of 0.9290 EUR CHF initially. In summary, EUR CHF is slowly plunging towards its support line.

Cash Has Not Spoken Its Last Word.

While Switzerland is well placed among European countries using alternative payment methods to cash, many countries in recent years have attempted to eliminate cash transactions. According to a survey by the University of St. Gallen, 72% of Swiss are opposed to the elimination of cash. And many keep a cash reserve.

Following recent attacks on underwater cables in the Baltic Sea, and especially hybrid war threats such as hacker attacks that could end with a ceasefire in Eastern Europe, countries like Sweden, Norway, Denmark, and the Netherlands, which had limited the use of cash in transactions, are backing down. Others are following suit. In the face of cyber-attacks, these states are advising their citizens to build a cash reserve in all denominations. This is to be able to obtain consumer goods in case of a blackout.

Sweden is known for having dematerialized money, and it is very difficult to find a banknote dispenser in the country's major cities. To such an extent that the currencies of Nordic countries, led by Sweden, are no longer accepted by most exchange offices in Switzerland. In this Nordic country, 87% of daily transactions are conducted using digital payment methods. But the Swedish national bank is now backing down and wants to give a larger share to cash operations. In the Netherlands, authorities now advise maintaining a cash reserve of euros in all denominations, ideally 400 to 500. This is a collateral effect of the war raging in Eastern Europe. The Swedish government is thus retracting and has taken measures to ensure the rights of Swedes to use cash, without abandoning the predominance of digital transactions.

In Neighboring France

It is in neighboring France, that Europe's record for the use of cash, closely followed by Germany, sees the use of physical money supported by 84% of respondents. Euro banknotes and coins are a reserve value, and the French are no laggard compared to the Swiss.

The Bank of France supports a balance between different payment methods. This is a desire for financial inclusion and economic resilience, while also combating tax fraud and trafficking. Thus, European banks send all 500-euro banknotes passing through their hands for destruction. The production of these banknotes was already stopped several years ago. As we saw in a previous analysis, the maximum amount one can pay in euros in commerce in France is 1,000 euros. In Switzerland, it is 100,000 francs. 100 times more. In exchange offices, our neighbors require an ID as soon as you convert 1,000 euros from or into a foreign currency.

The general trend, whether for the use of euros, Swiss francs, or currencies of Nordic countries, remains oriented towards digitization. Only geopolitical circumstances have led most European countries to slow this trend in order to offer alternative cash solutions.

In the Secrets of Euro Masters

Ben S Change Solution has already presented you with an article on the manufacturing of Swiss banknotes. Have you ever encountered counterfeit banknotes? If we are not equipped like high-performing exchange offices with counters that instantly detect the best counterfeit banknotes, it has probably happened to you once in your life. We recommend this excellent report on the manufacturing of euro banknotes by print shops affiliated with the Bank of France. There, you will discover the security features and their secrets that make the inviolability of the 8 million banknotes produced each day in their factories, and their manufacturing process. Here is the link: www.youtube.com/watch?v=mEk0HFPaTZE

Enjoy watching. 

What to Do in Geneva and Surroundings This Weekend?

At La Bonbonnière, always, the chocolate school offers 2-hour introductory courses to chocolaterie. You will taste some of La Bonbonnière's flagship creations, after which the master chocolatiers will reveal secrets of Swiss chocolate. You will then move on to practice by making your own truffles, for which they will show you some techniques. The event takes place at the Chocolat School, Rue Pierre Fatio 15, Geneva. It costs 90 francs for this gastronomic journey.

La Bonbonnière is still organizing a brunch this Sunday at 9:00 AM, Boulevard des Philosophes No. 3. Congratulations to the early risers.

In the region, you can choose between a dancing tea in Bonneville this Sunday at 3 PM, a rock concert on Sunday at 6 PM at Carroz d'Arache, with Allan Fakeman at 9 PM Place de l'Ambiance (it doesn't make itself up), or at Château Rouge in Annemasse, with San Severino this Saturday at 8:30 PM.

See You Next Week

It is now time to say goodbye. Next week, we will exceptionally pass the baton to our CEO, who joins the entire editorial team to wish you an excellent weekend.

X.C.