The Swiss Franc Refuses to Drop

Season's Greetings to the EUR/CHF

    This week, the EUR/CHF exchange rates have once again surprised many experts. Contrary to expectations, the Swiss franc has rallied back near its pre-SNB meeting levels. This development has delighted Swiss travelers heading abroad for the holidays and cross-border workers who need to exchange their Swiss francs into euros—especially those fortunate enough to receive year-end bonuses. Even the US dollar has become more affordable, defying market forecasts.

     Should we anticipate significant positioning on the EUR/CHF pair as the year-end approaches, similar to last year? Will there be large-scale carry trade operations? We’ll revisit these questions in the new year.

USD/CHF Following the Fed Meeting

     This week marked the third highly anticipated meeting of the three major central banks influencing the EUR/CHF exchange rates. Comments by the Federal Reserve Chair on the resilience of U.S. inflation—rising from 2.3% to 2.5% compared to October’s reading—disappointed markets and triggered pessimism. Excluding food and energy, inflation is close to 3%. U.S. household spending and income rose by half a percentage point in November.

     The U.S. dollar strengthened against the euro, which would logically suggest gains against the Swiss franc as well. However, the USD/CHF fell by 75 pips. Amid uncertainty, the Swiss franc once again served as a safe-haven currency, despite the SNB's recent 0.50% interest rate cut and a previous swing of 150 pips.

When Elon Musk Shakes Up Congress

    Another disruptive factor for investors was Elon Musk’s intervention—amplified by Donald Trump—which sought to derail an almost-finalized amendment. Leaders of various U.S. congressional parties were set to vote on a bill, on the same day as the Fed meeting, to prevent a government shutdown resulting from budget disagreements. Such a shutdown would paralyze the federal administration. Musk’s maneuver succeeded, casting a shadow over U.S. institutions and the economy, and dampening market performance.

    These two intertwined events weighed heavily on the week’s trading, affecting the exchange rates of the Swiss franc, euro, and dollar, while also jeopardizing the typical year-end rally that usually ensures portfolio profitability. Bonds, however, showed signs of recovery.

Will the Swiss franc’s exchange rate end the year as high as it began?

An Expert’s Forecast for the EUR/CHF

Economic Outlook in Switzerland

    According to Fredy Hasenmaile, Chief Economist at Raiffeisen, the disparity between U.S. and European inflation rates and Switzerland’s genuinely low inflation should boost trade and exert downward pressure on the Swiss franc. Long-term interest rates have fallen sufficiently to improve credit accessibility for businesses and households, along with an increase in real wages.

    The Chief Economist at UBS believes this environment will benefit Switzerland, with GDP growth projected to rise from 1% in 2024 to 1.3% in 2025. This growth, however, will be constrained by sluggish responses from Switzerland's neighbors—Germany and France—grappling with political crises, collapsed governments, and structural regulations hindering their recovery. The analyst highlights the challenges Europe faces, with Switzerland emerging as a beacon of stability.

Implications for the Swiss Franc

    Hasenmaile predicts that the Swiss franc’s strong exchange rates will persist through 2025. Swiss exporters will face increasing pressure as European orders decline. The European Central Bank (ECB) is likely to cut interest rates faster and more aggressively than expected to counteract weak economic activity across the continent. Consequently, the SNB may be forced to follow suit, possibly reducing its key rate to 0%. This would be the only way to alleviate upward pressure on the Swiss franc’s exchange rate.

    For the expert, the Swiss franc is currently overvalued, though this cannot solely be attributed to narrowing interest rate and inflation differentials.

    Another source of continuous pressure on the Swiss franc’s exchange rate is the unprecedented geopolitical uncertainty and mounting economic risks, particularly since Donald Trump’s election.

A Stable but Challenged Economy

    Low inflation projections, an SNB committed to lowering rates to address the franc’s overvaluation and stimulate external trade, and modest growth prospects still point to a prosperous Swiss economy in 2025. This is despite a declining European environment.

The Week of the EUR/CHF

EUR/CHF

Following the SNB’s interest rate cuts, the EUR/CHF pair experienced significant gains. On December 17 at 9:15 AM, the currency pair reached its weekly peak at 0.9420 EUR/CHF. However, the EUR/CHF lost 50 points after the Federal Reserve Chair’s cautious remarks. Since then, the pair has stabilized around 0.9300 EUR/CHF.

    Ahead of its next meeting, the SNB could further bolster its foreign currency reserves, converting billions of Swiss francs into euros and other foreign currencies. Such interventions could tip the balance. Between crises, surprises from the EUR/CHF should not be ruled out.

At the time of writing, one euro trades at 0.9306 EUR/CHF.

USD/CHF

    For the USD/CHF, similar dynamics have played out as with the EUR/CHF. Following the Federal Reserve’s announcements, the USD/CHF dropped by 100 pips, leaving experts who had confidently predicted a robust dollar under Donald Trump’s presidency in doubt. The gap between U.S. and Swiss interest rates now resembles a chasm, widening like the San Andreas Fault. Logically, this should have led to significant losses for the Swiss franc against the dollar. Yet the opposite occurred.

     Once again, investors sought refuge in the Swiss franc, a symbol of stability, while the euro plummeted by 150 pips against the U.S. dollar.

    Currently, one dollar is trading at 0.8963 USD/CHF. The currency is in high demand at exchange counters as Christmas holidays approach. Exchange clerks are meticulously inspecting the condition of dollar bills and managing the volume of smaller denominations based on regional needs. While smaller denominations matter little in the U.S., they are crucial in countries like Kenya or Vietnam. For tailored solutions, trust experts like Ben’s Shop Change. Many other currencies await. Safe travels to the fortunate globetrotters.

Markets and Commodities

 

A Challenging Year-End

    Broadcom is gradually eclipsing Nvidia in the minds of investors as the year-end nears. The rising star in semiconductor manufacturing, with a market cap of $1.17 trillion, operates in the same segment as Nvidia and has surged 40% in just 12 sessions. Meanwhile, Nvidia’s overinflated stock has declined by 6%.

    Investors are shifting their focus to Broadcom, which, unlike a pop star, doesn’t sing but produces chips for Google and Meta. The company is approaching $12 billion in profits and projects earnings between $60 billion and $90 billion by 2027.

Financial Insights: Wall Street and Beyond

 

Wall Street

     On U.S. markets, Federal Reserve Chair Jerome Powell’s “hawkish” speech—despite lowering U.S. interest rates to a range of 4.25% to 4.50%—felt like a cold shower to investors. A sharp market decline ensued. While the 0.25% rate cut was anticipated, it failed to reassure markets, which remain heavily reliant on Powell’s guidance. The American financial markets initially plunged but regained some momentum yesterday, while European markets saw steep declines. Investors are sensing that the Fed may be losing confidence in its earlier strategy of systematically reducing rates, a policy outlined in early autumn.

    Fed officials' stern warnings have left a bitter taste among investors, even before their holiday feasts of Christmas and New Year.

    The dollar gained ground against most major currencies but ultimately could not resist the Swiss franc’s safe-haven appeal. During the session, the USD/CHF exchange rate dropped by 80 pips. Meanwhile, yields on 10-year U.S. Treasuries surged to 4.52%, without punning on "bonds."

 

Swiss Market Index (SMI)

    On Swiss exchanges, the week brought grim news. Roche Laboratories announced that its Parkinson’s medication did not deliver expected results, leading to a 3.5% drop in its share price—a relatively modest decline given the broader losses sustained by the SMI. From 11,681, the Zurich-based index fell by 2% over the week, closing at 11,350 points.

The biggest decliners included ABB and UBS (both down 6%), along with Geberit, Sika, and Partners Group, all losing approximately 5%. Swiss Re stood out as the sole bright spot, with a 1% gain during an otherwise gloomy week dominated by fallout from the Federal Reserve’s statements.

 

Commodities

Oil

    Crude oil prices climbed from $73.40 to $74.50 per barrel earlier in the week, only to slump back to $72.50. Strong U.S. diesel demand initially supported oil prices, but the Federal Reserve’s cautious outlook cooled investor enthusiasm for futures contracts. Weak demand and abundant supply further pressured the market. Meanwhile, OPEC+ members agreed to extend existing production cuts, in place for two years, once again.

Gold

    Gold, often linked to luxury markets, hasn’t escaped the turbulence. While luxury goods are losing some of their luster, this alone does not account for the drop in gold prices, which could have otherwise benefited from stock market woes.

    In contrast, gold rebounded above $2,600, currently trading at $2,617 per ounce. One kilogram of gold is now valued at 74,400 Swiss francs. Collectible coins like the Swiss Vreneli and Napoleon are priced at 450 francs, compared to 330 francs a year ago. Though gold’s performance is less meteoric than Bitcoin’s, its holders likely sleep more soundly than crypto traders.

 

Cryptocurrencies

    Luxury brands are beginning to embrace Bitcoin and Ethereum as payment options, according to Esteban Tesson of Zone Bourse. This strategy is attracting a younger, crypto-savvy clientele, with companies like Gucci, Balenciaga, and LVMH leading the charge. In France, Printemps is the first major department store chain to accept digital currencies, partnering with Binance, the world’s largest cryptocurrency exchange.

While buying a loaf of bread with Bitcoin remains a distant prospect, the Trump administration’s embrace of digital currencies has propelled Bitcoin past the $100,000 mark.

    David Princay, CEO of Binance, disclosed that additional luxury brands have expressed interest in adopting cryptocurrencies. Virgin Voyage, for example, now accepts Bitcoin for high-end services, though the company has yet to share financial results. Regulatory challenges and volatility mean traditional state-issued currencies will remain dominant for now, but diversifying into cryptocurrencies might be worth considering—for those willing to bear the full responsibility.

    The United States is reportedly establishing a strategic cryptocurrency reserve, deepening its debt to acquire assets that are undeniably volatile but may become the payment standard of the future.

    Bitcoin continues to fluctuate around the $100,000 mark, with 10% swings over just a few days. It is currently valued at $97,700, or approximately 87,700 Swiss francs at current exchange rates—up from 37,500 francs just a year ago.

 

Ben S Editors’ Note

    A year ago, we cited Funstrat and several specialists in our EUR/CHF analysis, predicting Bitcoin would surpass $100,000 by year-end—three times its value at the time. It seems those forecasts have come true.

 

Expert Analysis for Traders

 

    The EUR/CHF pair touched a support level of 0.9260 last week before rebounding following announcements from central banks. We will monitor the formation of potential trend-reversal patterns on weekly charts. Although the curve was upward, it failed to breach the 0.9450 resistance, which could have pushed it beyond 0.9500, a level last seen in September. During its decline, the EUR/CHF did not break below the 0.9290 support. The next lower support is at 0.9256 EUR/CHF.

 

Weekend Activities in Geneva and the Region

 

Historic Tram Rides

    The AGMT (Association Genevoise des Tramways) is bringing old tramways back to life. Step into the past with these historic trams from the 1920s. Several routes are available. For more details, visit the association’s website: https://www.agmt.ch/.

Hikes on the Salève

    For the adventurous, hikes on the Salève are a fantastic way to stay active. A representative from the Geneva-based Friends of the Salève association will be waiting to guide you for free—no registration required—regardless of the weather. Meet at Route du Pas de l'Échelle 111, 1255 Veyrier on the Swiss side. For more information, visit: www.rando-saleve.net.

Biathlon World Cup at Le Grand-Bornand

    Sports enthusiasts can enjoy the Biathlon World Cup, held in Le Grand-Bornand from December 16 to 22, 2024, at the Sylvie Becaert International Stadium. The French team will compete on home soil. Join the Biathlon family and athletes in the French Alps for this thrilling event.

 

Ending 2024 in Style

For those hitting the slopes or soaking up the sun under palm trees, enjoy your holidays! Our exchange offices offer a wide range of foreign currencies, both exotic and common, to meet your travel needs.

    As the year draws to a close, we take a break for the festive season. However, our exchange offices remain open, including on public holidays, at border locations. Check the opening hours on our website.

    On behalf of the entire editorial team, I wish you an excellent holiday season. We’ll be back with New Year greetings and fresh analysis on January 10, 2025.

Warm regards,

X.C.