Euro to Swiss Franc (EUR/CHF) Exchange Rate Makes Gains as Swiss Production Contracts

Disappointing Swiss Industrial Production has prompted the Swiss Franc (CHF) to weaken, while the Euro (EUR) has strengthened on the back of improved German consumer confidence.

Euro Exchange Rate Trends Higher as German Consumer Confidence Improves

While traders have remained somewhat wary of the Euro (EUR) this week the single currency began to claw back ground on Thursday morning after the latest German GfK Consumer Confidence Survey.

Unexpectedly climbing from 9.4 to 9.5 the measure suggests that consumer sentiment within the Eurozone’s powerhouse economy has improved somewhat, in spite of slowdown concerns and tensions within the wider currency union.

Despite the finalised January Eurozone Consumer Price Index showing a slight upwards revision there are concerns that inflationary pressure will fail to maintain this momentum in February, with Friday’s German CPI forecast to slip back to 0.1%.

As the European Central Bank (ECB) continues to struggle with its 2% inflation target a weaker showing is likely to increase pressure on the central bank to ease further in March.

Contracting Swiss Industrial Production Increases Odds of SNB Easing

Increased market volatility has been helping to shore up the Swiss Franc (CHF) this week, particularly as disappointing data and ‘Brexit’ concerns weighed on the Euro.

Confidence in the Franc declined this morning, however, as fourth quarter Industrial Production was found to have contracted far more severely than investors had anticipated from -2.7% to -4.5% on the year.

Indicating that demand for Swiss products declined at the end of the year this does not bode especially well for the economic outlook of the domestic economy, as the strong Franc continues to drag on productivity.

With increasing expectations of monetary loosening from the ECB this unimpressive result is unlikely to deter the Swiss National Bank (SNB) from considering a further interest rate cut, as Europe edges closer to a currency war.

As a result the Swiss Franc to Euro (CHF/EUR) exchange rate was trending lower at 0.9157.

EUR/CHF Exchange Rate Forecast to Slip as Eurozone Inflation Weakens

Ahead of the weekend the latest raft of Eurozone data could provoke the Euro to Swiss Franc (EUR/CHF) exchange rate to return to a downtrend, as inflation data from Germany, France and Spain is due for publication.

The Euro could strengthen on the back of the annualised fourth quarter US GDP, however, as growth in the world’s largest economy is expected to weaken from 0.7% to 0.4%, due to the negative correlation that exists on the Euro to US Dollar (EUR/USD) exchange rate.

Swiss Non-Farm Payrolls could shore up the Franc tomorrow, if employment remains strong despite the downside risks current weighing on the domestic economy.

At the time of writing, the EUR/CHF exchange rate was trending higher at 1.0910.