The franc continues to soar against the euro
The Swiss currency traded shortly after noon at 0.9595 francs for one euro, after rising to 0.9552 EUR/CHF in the morning.
The Swiss franc crossed a new milestone on Monday in its soaring vis-à-vis the European currency, falling below the threshold of 96 cents for one euro. (archives)
KEYSTONE/GEORGIOS KEFALAS
The Swiss currency remained anchored below the bar of 0.96 francs for one euro Tuesday at midday, taking advantage of the weakness of the European currency.
Shortly after noon, the Swiss currency traded at 0.9595 francs for one euro, after rising to 0.9552 EUR/CHF in the morning, a new historic low for the currency pair. By way of comparison, the exchange rate still stood at 1.038 EUR/CHF at the beginning of January.
Should we be surprised, asks John Plassard, of Mirabaud Banque. On June 16, Thomas Jordan, President of the Swiss National Bank (SNB), had indeed affirmed that the franc was no longer at a high level and had not made it possible to protect Switzerland against the misdeeds of the imported inflation, he recalls.
A way of recognizing that the franc is no longer at the center of the SNB’s priorities and that an additional appreciation will no doubt be tolerated. Which was indeed the case, notes the analyst.
Fight inflation effectively
In short, a strong franc makes it possible to fight inflation effectively, and this explains concretely why the monetary institution has not intervened so much in recent weeks.
From a technical point of view, there is no support line and the EUR/CHF pair continues to fall, writes the Cantonal Bank of Zurich (ZKB) in a commentary. The euro being oversold, however, a short-term reaction could occur.
Other factors explain the euro’s decline, against both the dollar and the franc. While the markets expect monetary tightening in the United States of 75 basis points in September, in Europe the European Central Bank (ECB) is caught between the need to raise its rates and the need not to cause a recession, notes Jurus Arthur from Oddo BHF.
However, the announced closure of the Nord Stream 1 gas pipeline at the end of August has increased the price of natural gas by 14%. And even if the ECB raised its rates at the same speed as the Fed, it would not really bring down European inflation, which is mainly explained by soaring energy prices, underlines for his part Ipek Ozardeskaya, from Swissquote.
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