EUR/CHF hits lowest level since SNB’s 2015 de-pegging as Franc strengthens further
- EUR/CHF drops to its lowest level since 2015 as Franc strength accelerates.
- Global equity selloff amid stretched AI valuations boosts demand for the Franc.
- Eurozone GDP and employment data come in steady but fail to shift sentiment toward the Euro.
The Euro (EUR) extends losses against the Swiss Franc (CHF) on Friday, with EUR/CHF sliding to its lowest level since 2015, when the Swiss National Bank (SNB) abruptly abandoned its minimum exchange-rate floor. At the time of writing, the cross is trading near 0.9188, marking its fifth straight daily decline as bearish momentum intensifies.
Analysts note that the Franc is benefiting from elevated market volatility amid a selloff in global equities on Friday, driven by renewed concerns over stretched AI valuations. Meanwhile, sentiment toward the Swiss economy has also improved following reports that Switzerland and the United States may be nearing an agreement to lower US tariffs on Swiss exports from 39% to around 15%.
The current price level carries added significance for traders because it echoes levels last seen during the 2015 de-pegging episode. On 15 January 2015, the Swiss National Bank abruptly abandoned its long-defended CHF 1.20 per EUR minimum exchange rate, triggering one of the most dramatic currency moves in modern FX history. EUR/CHF collapsed within minutes, with the Franc appreciating by roughly 20-30% against the Euro.
The SNB later explained that the international environment had shifted to a point where maintaining the floor would require “permanent currency interventions of rapidly increasing magnitude,” forcing policymakers to abandon the cap.
The latest strength in the Franc against major peers puts the spotlight on the risk of SNB intervention, should the currency’s rapid appreciation begin to threaten Switzerland’s economic outlook. The country is highly exposed to exports, and a stronger Franc can quickly undermine competitiveness for Swiss firms.
On the Euro side, stable Eurozone data offered little support. Preliminary Eurozone Gross Domestic Product (GDP) grew 0.2% QoQ, in line with the 0.2% forecast and unchanged from the previous 0.2%. On an annual basis, GDP rose 1.4%, slightly above the 1.3% forecast and the prior 1.3%. Employment Change increased 0.1% QoQ in Q3, matching both the forecast and the previous 0.1% reading.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.