In spite of being on the forex arena for only two decades, EUR/CHF has proven itself to be one of the major powerhouses of currency trading. However, considering the global economic uncertainty, political crises and market instability, it can be rather hard to predict what might happen next.
While the EUR/CHF price graph is nothing if not volatile, let’s take a look at the latest EUR to CHF forecast to get you prepared for what the future holds.
The basics: everything you need to know about the EUR/CHF pair
The currency pair of the euro against the Swiss franc is one of the most popularly traded on the foreign exchange market. The EUR/CHF pair represents how many Swiss francs – the quote currency – are needed to buy one euro – the base currency.
The EUR/CHF pair is a good example of what's known as a cross-currency pairing, meaning that it is traded directly, without being first converted into the U.S. dollar. As a matter of fact, the EUR/CHF pair is the third-most frequently traded cross-currency pair in the market today. Therefore, the high volume and daily changes in EUR/CHF trading can often provide international traders and investors with great opportunities.
The pair has gained its popularity thanks to the world-renowned Swiss financial system, which has historically been considered a safe haven for investors and their capital. As a result, many often turn to the Swiss franc during times of increasing market volatility. That, in turn, tends to drop the rate of the EUR/CHF pair, as the CHF strengthens against the EUR.
Why do traders choose the EUR/CHF pair? First and foremost, directly exchanging euros for Swiss francs protects forex traders from volatilities associated with the U.S. dollar. Moreover, once incorporated in one’s investment portfolio, the pair can serve as a hedging tool against fluctuations in other international currencies.
Throughout history, the euro and the franc have shown a strong correlation to one another. According to some analysts, in 2010-2015, the correlation between these two was about 91%.
This strong correlation means that once the euro rises against the U.S. dollar, the Swiss franc tends to do the same. Because of this, the USD/CHF and EUR/USD currency pairs are strongly negatively correlated: up to -95%. Simply put, when one currency pair appreciates, the other almost inevitably falls.
Factors that affect the EUR/CHF rates
There are many factors that have a great impact on the value of the euro and the Swiss franc in relation to each other, as well as to other currencies. Employment figures, GDP growth, import and export data, inflation or economic and political crises can have a significant influence on the currency pair.
Currently, one of the biggest issues are the relations between the EU and Switzerland.
Despite its location in the heart of Europe, Switzerland refuses to join the EU. In 2014, the two sides began negotiating a framework to refine some bilateral agreements. A key matter in these negotiations is concerning Switzerland’s access to the European Union’s single market.
After years of negotiations, the EU is pushing for Switzerland to sign the agreement. However, at the end of 2018, the Swiss government submitted the agreement to public consultation. Brussels, the de facto capital of the EU, has given Switzerland until July 2019 to decide whether it wants to accept the deal.
Moreover, another conflict arose on August 29, 2019. This time, it revolves around the concept of “equivalence.”
For years, Switzerland has remained the EU's third-largest trading partner, playing a key role in the Union’s exports and imports. In 2018, Switzerland accounted for 5.5% of the EU's imports and 8.0% of its exports.
EUR/CHF analysis: what historical charts look like
Let's take a look at the EUR/CHF trend starting from the introduction of the euro in 1999.
At the beginning of the Great Recession, the Swiss franc appreciated against all major currencies, except for the Japanese yen.
The EUR/CHF pair started trading in 1999 at a rate of 1.5979. Between 2007 and 2011, the EUR fell against the CHF dramatically, dropping to 1.0964. From the end of 2011 to mid-January 2015, the euro gained upside momentum, and the pair traded between 1.20 and 1.24. However, another sharp decline happened on January 19, 2015, when the pair hit its historically lowest rate of 0.9866.
At the time of writing, on August 30, 2019, the EUR/CHF pair traded in the range of 1.087-1.0922.
What to expect: the EUR/CHF forecast for 2019 and beyond
These days, the European Union’s currency is unstable. Unceasing migrant and refugee issues, Italy’s political crisis and weak economic reports have only added fuel to the fire.
Today, several factors are pushing the euro towards a downward dynamic.
Germany’s economy has been essentially flat over the last year. In recent reports, it was revealed that the country’s GDP growth fell into the negatives (-0.2%) for the first time since the third quarter of 2018. Germany, which is known as the locomotive of the overall European economy, might be teetering close to recession.
The head of the Ifo Institute for Economic Research, Prof. Clemens Fuest, has said: “This is very bad news indeed. It’s not just manufacturing where the decline continues, but we now see that the weakness is really affecting the services sector which is large and important for the German economy.”
Additionally, the German ZEW Economic Sentiment fell to -44 points compared to the expected -28.5 points. Afterwards, the Eurozone showed similar figures, dropping to its lowest level since 2010 — -43.6 points.
Thus, the fundamental background for the euro remains negative, heavily impacting the EUR/CHF predictions.
Based on the forecast of Walletinvestor.com, a long-term increase is predicted for the EUR/CHF pair. Their exchange rate prognosis for August 2024 is set at 1.152. Therefore, if you invest in this pair today, the revenue is expected to be around +5.87% in 5 years.
Based on their EUR/CHF forecast for 2019-2020, the pair is anticipated to trade at a quite stable level:
According to another popular forecasting agency, Longforecast.com, the EUR/CHF rate is expected to hit 1.147 by September 2023.
Here is their euro vs Swiss franc prognosis for the next few years:
On the other hand, analysts at Gov Capital have a much more bullish outlook. They have said that by the end of August 2024, the EUR/CHF rate may reach 5.186.
This is what their one-year forecast looks like:
In regards to short-term perspectives, according to the expectations and global macro models of the analysts at Trading Economics, the EUR vs CHF pair is expected to trade around 1.1 by the end of this quarter.
Taking into consideration the uncertainty in Europe, it may not be the best time to invest in the EUR/CHF pair. However, you can still try to profit from the forex volatility through contracts for difference.
What is your bet on the EUR to CHF forecast?