US-EU Trade Tensions Fail to Prevent Euro Swiss Franc (EUR/CHF) Exchange Rate Uptrend
A fresh flaring up of trade tensions between the US and EU failed to knock the Euro to Swiss Franc (EUR/CHF) exchange rate off its uptrend on Tuesday.
Even as the Trump administration threatened to impose tariffs worth $11 billion on a range of EU goods the mood towards the Euro (EUR) remained generally positive.
As the tariffs would only come into force in the wake of the World Trade Organisation’s (WTO) ruling on Airbus subsidies later in the summer the impact of the threat ultimately proved limited.
Nevertheless, this move casts a fresh shadow over the outlook of the Eurozone economy, especially on the heels of Monday’s underwhelming German trade data.
While the Swiss unemployment rate eased from 2.7% to 2.5%, however, this was not enough to weigh down the EUR/CHF exchange rate at this juncture.
Signs of ECB Dovishness Set to Diminish Euro (EUR) Appeal
Wednesday’s European Central Bank (ECB) policy announcement could weigh heavily on the Euro, returning the EUR/CHF exchange rate to a weaker footing.
If policymakers show fresh signs of dovishness this could see the single currency trending sharply lower across the board.
In the light of recent underwhelming Eurozone data ECB policymakers look set to maintain a cautious outlook on the economy.
Signs that the central bank is leaning towards a more dovish policy outlook would leave EUR exchange rates exposed to fresh selling pressure.
As long as the ECB looks set to leave interest rates at their current record lows for longer the mood towards the Euro is unlikely to see any material improvement.
On the other hand, if ECB President Mario Draghi expresses a greater sense of confidence in comments following the meeting this could offer the EUR/CHF exchange rate a fresh boost.
An indication that the central bank is not likely to engage in further monetary loosening in the months ahead may boost the appeal of the Euro.
Trade Worries and Weakening Eurozone Output to Weigh on EUR/CHF Exchange Rate
However, the mood towards the single currency could sour further ahead of the weekend if February’s Eurozone industrial production data shows a fresh contraction in output.
Further signs of a slowdown within the German manufacturing sector would give investors fresh incentive to sell out of the Euro on Friday.
If trade tensions between the US and EU continue to escalate the EUR/CHF exchange rate also appears vulnerable.
The prospect of a US-EU trade spat could encourage a fresh bout of market risk aversion, driving up demand for the safe-haven Swiss Franc (CHF).
A lack of progress towards an imminent resolution of the US-China trade dispute could also support the Swiss Franc in the days ahead, with recent assurances showing little sign of materialising into concrete action.
