Established in 1974
185,800 clients worldwide
Over 15,000 markets

The Euro broke new grounds versus the dollar, what about EUR/CHF?

The diverging positions between the Fed and the ECB gives way for a higher euro.

bg_swiss_coin_1211930

The annual Jackson Hole meeting did not break any new grounds. Janet Yellen avoided any reference on monetary policy, while Mario Draghi refrained from commenting on the Euro strength. Nevertheless, it turned out to be an impactful event for the greenback and the common currency both hitting multi-year levels. By remaining silent, the Fed basically retains the prudent stance adopted over the past months, making a hike in December nothing less sure, and further depreciating the dollar. On the other side, the absence of concern on the euro from Draghi also confirms the ECB’s latest hawkish stance. The diverging positions between the Fed and the ECB gives way for a higher euro and a weaker dollar at least until next meeting in September.

The EURCHF followed a similar pattern than the EURUSD, with a strong bullish impulse followed by a consolidation period during August. While the EURUSD broke to new highs following Jackson Hole, EURCHF stalled within its consolidation pattern. There are a few reason that may explain why the franc did not follow through:

  • The strong demand for safe haven such as Gold lately may have spurred some interest for the Franc.
  • The SNB may have reduced some of its foreign assets, hence buying back the Franc.
  • The perception that any monetary tightening by the ECB will be following by the SNB. 

We believe these factors are temporary, and as markets turn risk-on again the Euro should outperform the Franc again. Moreover, if indeed the SNB will follow closely what the ECB does, the latter will most definitely be the one to move first. Watch for a break of the short-term bearish trendline above 1.1450, which could lead to a strong upside making our beloved 1.20 floor rate not so unrealistic anymore.

Daily chart EURCHF vs EURUSD (basis 100 on January 1st 2017): The Euro is up nearly 15% compare to the Greenback and 6.5%  compared to the Franc

Daily chart EURCHF vs EURUSD

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts