The euro regains strength against the franc on the backdrop of an increasingly likely rate hike by the ECB
After plunging to a 7-year low at the start of the year, EUR/CHF has been consolidating for a long time over the past two months and now seems to want to regain some height. The euro indeed returned to its highest level of early March, at 1.04 against the franc, amid growing expectations of a rate hike from the European Central Bank. Indeed, after having rejected for several months the advances of market operators in favor of a rate hike by the ECB, the voices within the institution are starting to multiply in favor of an acceleration of monetary tightening.
More officials are in favor of raising rates to tackle runaway inflation, and the first could come as soon as the July meeting, according to nine Reuters sources and Olli Rehn, a member of the institution’s board of governors. . Traders currently expect the ECB to hike rates by 106 basis points by the end of the year and by 112 basis points next year.
On the other hand, the SNB still does not plan to tighten its monetary policy. At least that’s what its chairman, Thomas Jordan, said at the last monetary policy meeting in March, who believes that “inflation remains subdued enough not to require a change in monetary policy and that it expected to return to stable proportions in the ‘foreseeable’ future.”
The EUR/CHF could therefore accelerate its rebound in the coming weeks, as the ECB toughens its tone on inflation, but the evolution of the situation in Ukraine will be one to watch, as the Swiss franc should benefit from its safe haven aspect to outperform if the situation becomes even more dangerous.
EUR/CHF daily price chart – key levels