The Euro to Swiss Franc (EUR/CHF) exchange rate gave up some gains on Tuesday after German Producer Prices declined in December by -0.7%.
However, investors will be keeping a careful eye on the ZEW Eurozone and German economic sentiment surveys out later in the day. If the ecostats increase as forecast, the Euro could rally.
The Euro to Swiss Franc (EUR/CHF) exchange rate rocketed in the second half of Monday’s European trading registering market movement of +2.40%.
As investors await the European Central Bank’s (ECB) announcement regarding monetary policy on Thursday, French President Francois Hollande beat the bank to it suggesting that the central bank will announce a period of quantitative easing.
Hollande stated: ‘On Thursday, the ECB will take the decision to buy sovereign debt which will provide significant liquidity to the European economy.’
However, the Euro has remained resilient despite the news.
Economist Christian Schulz suggested: ‘The real question for France is whether the ECB’s efforts will be completes by national structural reforms or not. Had Mr Hollande said that his government will start new structural reforms on Thursday, the market reaction would have been far more positive.’
The Euro to Swiss Franc (EUR/CHF) began climbing early in Monday’s European session with market movement of +0.65% after Swiss producer and import prices fell in December.
The Swiss Producer and Import Price index fell by -0.4% in December, dragging the annual figure down from the previous -1.6% to -2.1%.
Earlier… The Euro to Swiss Franc (EUR/CHF) exchange rate is likely to remain soft well into next week after the Swiss National Bank (SNB) removed the 1.20 cap between the ‘Swissie’ and the Single Currency.
A bearish Euro could trundle through the week ahead of arguably one of the most important European Central Bank (ECB) meetings in recent years.
January 22nd will see the ECB announce its plans for monetary stimulus after the Eurozone recently entered a period of disinflation.
This week’s removal of the 1.20 Euro to Swiss Franc exchange rate ceiling has spooked investors, as the decision has led them to expect drastic action from the central bank.
Currency strategist Kengo Suzuki commented: ‘With the Swiss central bank’s policy shift, the Euro slid and the Franc surged, creating a spike in volatility and that’s led to a risk-off trade.’
Although SNB Chairman Thomas Jordan has come under intense criticism for his handling of the situation, in a recent interview he asserted that the entire board was behind the decision. Jordan commented; ‘We always take all decisions together, after an intensive discussion. It goes without saying.’
The surprise SNB announcement sparked massive movement in the currency market and a broadly softer Euro exchange rate.
Global market researcher Richard Yetsenga stated: ‘We’ve had an enormous and discreet and untradeable move in currencies, which has caught a lot of investors offside. It does seem the Euro will be much weaker than we thought.’
Euro to Swiss Franc (EUR/CHF) Exchange Rate Forecast
However, the European Central Bank’s next move isn’t the only factor that could influence the Euro to Swiss Franc (EUR/CHF) exchange rate next week.
Of low influence, but still able to move the Franc, will be Monday’s Swiss Producer and Import Prices. On the year the November ecostat registered a -1.6% contraction.
ZEW will publish both German and Euro Economic Sentiment Survey’s on Tuesday, which will be highly influential for the Euro exchange rate. However, even a favourable climb in figures is unlikely to offer the soft Euro massive support ahead of Thursday’s ECB announcement.
In December, the German stat resided at 34.9 while the Eurozone figure was slightly weaker at 31.8. ZEW’s German Current Situation Survey is also out for publication and registered 10 index points in December.
The ZEW data continues on Wednesday when the Swiss Expectations Survey will be released. The expectations ecostat could claw back some losses in January after December’s -4.9%.
Friday will finish the week for Eurozone and Swiss data with the release of German and Eurozone Manufacturing, Services and Composite Purchasing Managers Indexes (PMI). Any favourable January ecostats could help the Euro exchange rate.
However, the Euro may trend lower depending on the outcome of Thursday’s ECB announcement.
If economists are right and the European Central Bank action is expansive and continues for an extended period, the Single Currency could suffer.
Rumours have circulated that the European Central Bank could implement a quantitative easing plan of €500 billion; if this is announced on Thursday, economists’ speculation is likely to mount as to whether the plan will be big enough to cause the desired impact.
Furthermore, dependent on Thursday’s ECB announcement, we may be able to gain some further insight into why the Swiss National Bank made such a seemingly swift decision to drop its Euro to Swiss Franc (EUR/CHF) exchange rate ceiling which has been in place for three years.