Euro to Swiss Franc (EUR/CHF) Exchange Rate Forecast: Euro Trends Lower after Weidmann Dismisses Further ECB Stimulus

Safe-haven demand has benefitted both the Euro and the Swiss Franc on Monday, although the EUR/CHF exchange rate has weakened due to comments from European Central Bank (ECB) policymakers.

Mixed Messages from ECB Policymakers Soften Euro (EUR) Exchange Rate

It had been something of a turbulent day for the Euro (EUR) on Monday as comments from a number of European Central Bank (ECB) policymakers have been primarily in focus.

Ahead of the weekend Peter Praet had floated the suggestion that the central bank could still cut interest rates lower and potentially consider the implementation of so-called ‘helicopter money’ in order to combat deflationary pressures.

This was strongly refuted by Bundesbank President Jens Weidmann today, who reaffirmed his position as a dissenting hawk by stating that the ECB needs to hold steady in coming months rather than throwing more stimulus at the problem.

With Benoît Coeuré noting that governments need to do more and cannot rely on monetary policy alone and Francois Villeroy de Galhau indicating that negative interest rates are in fact limited in their effectiveness, it seems unlikely that the ECB will achieve consensus at its next meeting.

As the European Commission also revealed that Consumer Confidence in the Eurozone had continued to diminish in March there has been little incentive for investors to favour the Euro over the Swiss Franc (CHF) today.

Swiss Franc Advances against Rivals Today Despite Narrowed Surplus

Despite a disappointing Swiss Current Account the Franc has continued to advance against many of the majors on Monday afternoon, benefitting from increased safe-haven demand.

Although expectations had pointed towards a narrowing of the Swiss surplus the figure was ultimately found to be lower than forecast, falling to 15.9 billion rather than 21 billion, offering another indication that the domestic economy is weakening.

While the Swiss National Bank (SNB) took a decidedly more dovish tone at last week’s policy meeting, stressing downside risks even as interest rates were left on hold, this weaker showing has nevertheless failed to soften the Franc.

At the time of writing the Swiss Franc to Euro (CHF/EUR) exchange rate was trending higher at 0.9167.

EUR/CHF Exchange Rate Forecast to Climb on Stronger German Sentiment Surveys

On Tuesday the EUR/CHF exchange rate may return to an uptrend if the latest German IFO Business Sentiment Survey demonstrates that March saw an improvement in confidence amongst domestic businesses.

February’s Swiss Trade Balance is also expected to provoke volatility for the EUR/CHF currency pair, with any additional deterioration in economic conditions likely to undermine the appeal of the Swiss Franc.

With the ZEW Economic Sentiment Survey also due for publication tomorrow the Euro looks set to regain some of its lost ground, with stronger domestic data expected to reassure markets in spite of the increasingly conflicted outlook of the ECB.

At the time of writing, the Euro to Swiss Franc (EUR/CHF) exchange rate was slumped in the region of 1.0903.