The Euro to Swiss Franc (EUR/CHF) exchange rate continued to trade at a record low on Friday and more losses are forecast as the financial markets continue to reel from the turmoil created by the Swiss National Bank’s decision to end its currency cap against the single currency.
Swiss National Bank Decision Batters Euro
In yesterday’s session the Euro suffered its largest one-day decline in history and is now, holding just above the record 11-year low it crashed too as the Swiss move caused investors to increase their bets that the European Central Bank will launch a quantitative easing programme at next week’s policy meeting.
Switzerland’s central bank unexpectedly abandoned the franc’s three-year-old cap of 1.20 per Euro after a policy meeting on Thursday, sparking the biggest surge in the currency on record. The franc appreciated to 85.172 centimes per euro yesterday, the strongest since the single currency was introduced 16 years ago,
The Euro tumbled by 30% and a number of forex brokers went bust following the Swiss National Bank’s announcement. More losses in the currency pair are expected ahead of the ECB meeting on January 22.
As Friday’s session progressed, the Franc did drift slightly lower against the Euro but any hopes that it would fall further were dashed.
‘At least in the short term, we’ll continue to see weakness in the EUR/CHF cross. It would be a huge simplification to expect all of the positions to have been unwound,’ said Robert Rennie, head of currency and commodity strategy at Westpac Banking Corp.
Inflation Data Weakens Euro Exchange Rate
The Euro came under even more pressure on Friday after data out of Germany and the wider Eurozone confirmed that the region had slid into deflation territory in the last month of last year. Steep prices, compounded by tumbling oil prices showed that the annual rate of inflation in Germany, measured according to common European Union standards, was 0.1% in December, while prices also rose 0.1% on the month, the Federal Statistics Office said, confirming its preliminary figures published earlier this month.
Inflation in the wider Eurozone however was confirmed to have entered negative territory in December as the Harmonized Index of Consumer Prices fell 0.2% on a year-on-year basis last month, reversing the 0.3 percent rise in November. The drop was the biggest fall seen since September 2009, when prices decreased 0.3 percent.
Negative annual inflation rates were reported in 16 of the 19 Eurozone members.
Euro Exchange Rates:
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