EUR/CHF slides toward one-month lows as geopolitical risks lift Swiss Franc
- EUR/CHF trades near one-month lows as geopolitical tensions lift safe-haven demand for the Swiss Franc.
- Swiss ZEW Expectations fall in December but fail to undermine the Franc’s strength.
- Steady SNB policy and a high bar for negative rates continue to support the Swiss Franc.
The Euro (EUR) remains under pressure against the Swiss Franc (CHF) on Tuesday, as rising geopolitical tensions drive flows into the safe-haven Franc. At the time of writing, EUR/CHF trades around 0.9287, hovering near its lowest level since November 21.
Renewed tensions between the United States (US) and Venezuela have added to broader risk aversion after US President Donald Trump imposed a blockade on sanctioned Oil tankers entering and leaving Venezuela. The escalation has weighed on market sentiment, helping the Swiss Franc outperform risk-sensitive currencies such as the Euro.
Beyond risk aversion, investors are also favouring the Swiss Franc over the Euro on relative macroeconomic fundamentals. The Eurozone economy continues to show signs of subdued and uneven growth, with weak manufacturing activity and cautious consumer sentiment weighing on the outlook.
On the data front, the Eurozone economic calendar remains light as markets drift toward the year-end holiday period. On the Swiss side, the ZEW Survey – Expectations for December fell to 6.2 from 12.2, pointing to a softer sentiment outlook. However, the weaker reading did little to dent the Swiss Franc’s strength.
On monetary policy, both the European Central Bank (ECB) and the Swiss National Bank (SNB) kept interest rates unchanged at their most recent meetings, though their forward guidance points to subtle differences in outlook. The ECB held its key rate at 2.00%, reiterating a meeting-by-meeting, data-dependent approach as inflation remains close to target and growth shows modest resilience. Markets broadly expect rates to remain steady through 2026, although some investors see the next policy move more likely to be a rate hike.
Meanwhile, the SNB left its policy rate at 0%, with most economists expecting it to maintain that stance through 2026 as inflation remains subdued and the medium-term outlook broadly unchanged. Policymakers have also signalled a high bar for a return to negative rates, noting that inflation is expected to edge higher over the coming quarters.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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