EUR/CHF Hits New 18-month Lows

EUR/CHF Hits New 18-month Lows

02 November 2021

EUR/CHF exchange rate has hit new lows of 18 months briefly on Monday with level under 1.055, and experts see another low of 1.050 post-pandemic.

New Lows

              EUR/CHF exchange rate has dropped again, hitting new lows of 18-month. It is now at level under 1.0550. It continues its October decline. According to technicians analyzing this pair of currencies, after the pandemic of COVID-19, lows of below 1.050 can be tested by the exchange rate of EUR/CHF. This point was already touched by EUR/CHF last May. Just in October EUR/CHF went down by 1.9%, from around 1.0800 to under 1.0600. Earlier today it tested a low of 18-month, by briefly slipping under 1.0550.

Surprisingly Strong Franc

              Very good exchange rate of CHF is coming as a surprise for many. There are no factors observed that could really trigger such a rally of Swiss franc. Recently there is observed growth of inflation pressures around the world that lead to repricing of interest rate hike among G10 central banks – though with the exception of Switzerland. This should lead to opposite reaction than spike in CHF price. Also, there is nowadays high-risk mood among investors in currencies and stocks. This should stop investors from buying safe-haven currencies like CHF. Meanwhile, many investors now decide to buy Swiss francs, even though there are risk-oriented.

ECB’s Policy

              Perhaps the answer to question why CHF exchange rate is so strong lies in the recent stance of the European Central Bank. Last Thursday’s comment after meeting brought market’s bet on hike of interest rate further forward. Now there are foreseen 10bps hike in July and 20bps hike in October. Experts count on that the ECB will lose patience with growing inflation and start making interest hikes by the middle of next year. The Swiss National Bank can follow suite. Perspective of interest hike is putting long-term outlook for EUR in negative perspective.

Events Ahead

              Some interesting events on the economic market can influence further EUR/CHF rate this week. Among them there is final October Eurozone manufacturing PMI data publication and Swiss October CPI and September Retail sales data. In Swiss manufacturing output there was recently modest month on month slowdown, with October PMI at 65.4 from 68.1 last month. But this wasn’t enough to slow CHF exchange rate rise. After new economic data from eurozone and Switzerland, investors will turn their sight to FED and Bank of England decisions, as well as US jobs report.