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Swiss franc to have the worst month since July 2017

Swiss franc to have the worst month since July 2017

23 April 2019

The Swiss franc is about to experience the worst month in terms of its exchange rate in almost two years, which will probably serve as some good news to the SNB. Swiss policy makers long have claimed the currency is overvalued.

The end of too strong CHF?

April may become the worst month of the Swiss franc’s exchange rate against the euro since July 2017. The currency has already recorded a 2.5 percent loss in CHF/EUR exchange rate this month and such depreciation was last observed only in July 2017. The weaker franc is sure to please or at least bring a relief for Swiss policy makers, that have been complaining about overvalued currency that stand in the way of reviving inflation. The Swiss National Bank is on a mission to revive inflation and a weaker currency would significantly boost their efforts. The inflation is at below 1 percent level with interest rates kept at negative. The SNB seems likely to be calmer in the next few months due to the weaker franc.

Lower levels here to stay

On Tuesday the CHF/EUR exchange rate was at 1.445 euro, marking the weakest level since November 8th last year. Such results mean that the Swiss franc is already trading weaker than the median forecasted by Bloomberg’s analysts in a survey for the end of the second quarter – it was predicted to be at 1.1300, but at this point it is already known the median will be lower. What lies ahead of the Swiss franc? The decline might slow down a bit, but still its trajectory is likely to stay intact in the foreseeable future, as per opinion of the Canadian Imperial Bank of Commerce’s head Jeremy Stretch. His predictions for CHF/EUR exchange rate, as revised after the latest weakening of the Swiss currency, are that CHF will sail toward 1.15 per euro in the next half a year and only in the next year it will reach 1.16 euro. Whereas Manuel Olivier, a currency strategist employed by Credit Agricole, predicts that the Swiss franc will be at 1.1950 per euro in 2020. According to him, the euro is likely to benefit from a better trade-related capital flow or risk-asset situation, if the manufacturing sector that is sensitive to export changes will rebound and investors will start to show higher appetite for risk. Both conditions are widely expected to be met by analysts.

Time to re-arrange forecasts

The weaker Swiss franc is causing some headache for analysts that would need to re-arrange forecast for its exchange rate for the rest of this year and the next year. The problem is mainly the fact, that predicted market volatility was supposed to make investors to turn to buying safe haven currencies, like CHF for instance. Instead investors don’t buy Swiss francs, even though market is unsteady and economy of the world or the eurozone itself is struggling in its growth. As claims Stretch the case might be that the negativity focused on the global economy slowdown is a bit overrated, and the Swiss franc is the first victim of such situation. Another known reasons for the Swiss franc’s weaker position are Chinese data that were reported better than expected which triggered an optimism in the eurozone manufacturing area that overseas sales might influence the economic situation and support the euro in the process.

What do option traders think of it?

When it comes to option traders, they also have shown some increasing bearish attitude toward the Swiss franc. The one-year risk reversals against the common eurozone currency are becoming the most pessimists since May of last year.

What does all this mean for the customers of ExchangeMarket.ch?

Last month, we saw a great deal of interest from all our customers who wanted to buy cheap Euro. The moment was perfect because for a long time a cheaper euro exchange rate was given. Especially frontaliers have decided to use the opportunity to buy Euro. Also SMEs wanted to take the opportunity to be able to change CHF into euros.

Of course, as a swiss exchange bureau, we support all customers who want to change CHF into Euro and Euro into CHF. Our euro exchange rate is updated every 60 seconds so you always know at what exchange rate you can currently exchange money. Use our currency converter Euro CHF to compare our exchange rates and to convert Euro in CHF at the best exchange rate.

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