The EUR/CHF exchange rate dropped for three straight days as attention shifted to the upcoming Swiss National Bank (SNB) interest rate decision. It dropped to a low of 0.9557 on Thursday morning, down from the year-to-date high of 0.9665.
Swiss National Bank decision
The main catalyst for the EUR/CHF exchange rate will be the quarterly interest rate decision by the SNB.
Most economists expect the bank to slash interest rates by 0.25% and hold it there for a while. Some analysts believe that it will leave it unchanged until 2026, while others expect the rate to slash further and bring it negative.
The most recent data showed that Swiss inflation has moved downwards in the past few months and has dropped to the lowest level in four years. Economists expect Swiss inflation to average about 0.6% this year and 0.8% in 2025.
There is also optimism about the Swiss economy now that analysts expect the European Union to do well because of increased government spending. Germany, one of the most conservative countries in the region, has pledged and voted in favor of more spending on defense.
A stronger European economy leads to more demand for Swiss francs because of the close trading relationship between the two regions. It also leads to a stronger Swiss economy because of that trade partnership. Analysts see it growing by 1.3% and 1.5% in 2025 and 2025, respectively.
The EUR/CHF pair has also reacted to higher Swiss franc demand because of the ongoing trade wars by Donald Trump. These trade wars lead to more risks and Swiss franc demand. The franc is widely seen as one of the most popular safe haven currencies.
The SNB decision comes a day after Eurostat published the final February inflation figure. That report showed that the bloc’s inflation dropped to 2.3% from the previous 2.5%. Core inflation fell from 2.7% to 2.6%.
The ECB has been slashing interest rates in the past few months to boost the bloc’s growth. With signs showing that some European countries are growing, the bank will likely hold rates steady for a while.
EUR/CHF technical analysis
EURCHF chart by TradingView
The daily chart shows that the EUR/CHF exchange rate peaked at 0.9660 this month. This was a notable level because it was along the 61.8% Fibonacci Retracement level.
The pair has now pulled back to 0.9550 after European countries committed to more government spending. It has moved slightly below the 50% Fibonacci Retracement level.
The pair remains above the 50-day moving average, while oscillators like the Relative Strength Index (RSI) and the MACD have pointed downwards.
On the positive side for the euro, the pair is forming a bullish pennant pattern, which is characterized by a long vertical line and a triangle pattern. It is one of the most bullish continuation signs.
Therefore, the pair will likely bounce back in the coming days, and possibly retest the year-to-date high of 0.9660. A break above that level will point to more gains, potentially to 0.9775, the 78.6% retracement level.
The post EUR/CHF forecast: signal ahead of the SNB interest rate cut appeared first on Invezz
