Forecast: How will the swiss franc to euro exchange rate evolve for the end of 2024?
8 minutes|Updated on 07.11.2024
Author: Quentin Arts
8 minutes|Updated on 07.11.2024
Author: Quentin Arts
Since the beginning of 2024, the exchange rate between the Euro (EUR) and the Swiss Franc (CHF) has fluctuated significantly, ranging from 0.93 to 0.99 before stabilizing between 0.936 and 0.944 in early November. Although the Swiss Franc retains its reputation as a safe-haven currency, it has experienced a slight depreciation against other major currencies, losing over 10% against the US Dollar, around 8% against the British Pound, and approximately 7% against the Euro.
For cross-border workers, these fluctuations may affect the repatriation of their salaries and their purchasing power. International companies, on the other hand, must contend with this volatility to protect their profit margins.
In this article, we analyze the economic context, forecasts, and key factors influencing the EUR/CHF exchange rate, using the latest data from the Swiss National Bank (SNB) and the European Central Bank (ECB), along with expert insights, to provide practical tips and optimization strategies.
Since the early 2000s, the EUR/CHF exchange rate has experienced significant variations. For instance, the 2008 financial crisis saw the Swiss Franc appreciate as a safe-haven currency. In 2015, the Swiss National Bank (SNB) abandoned the minimum exchange rate of 1.20 EUR/CHF, leading to a sharp appreciation of the Franc and increased volatility. This decision aimed to combat inflationary pressures and allow for a more flexible monetary policy in response to Euro fluctuations. But what about the current context?
Switzerland: In September 2024, the SNB lowered its key interest rate to 1%, reflecting inflation that had stabilized at 1.1% in August, well below earlier forecasts. Projected GDP growth for 2024 was revised down to 1%. This monetary strategy aims to protect Swiss exporters from an overly strong franc.
Throughout 2023, Switzerland maintained a stable economy despite various geopolitical events. GDP growth, though modest, remained stable, driven by strong domestic demand and low inflation. The Swiss National Bank (SNB) pursued a prudent monetary policy, adjusting interest rates to control inflation and stabilize the franc. The labor market also performed well, with a low unemployment rate around 2.1% and moderate wage growth.
Source: Swiss National Bank - Annual report 2023
Eurozone: Inflation in the Eurozone decreased to 2.5% in September 2024. However, GDP growth remains weak at 0.4%, and forecasts do not indicate an immediate recovery. The ECB has maintained its interest rates to stabilize the euro amidst ongoing geopolitical uncertainties.
The Eurozone experienced an economic slowdown in 2023. GDP growth fell from 3.4% in 2022 to 0.4% in 2023, primarily due to the repercussions of the war in Ukraine and rising interest rates. Inflation, according to the European Central Bank (ECB) forecasts, though declining, remained high at 5.4% in 2023 before dropping to 2.7% in the first half of 2024. This situation weighed on the construction and manufacturing sectors, but the labor market showed some resilience with a stable unemployment rate of 6.5%.
Source: European Central Bank - Economic bulletin 2023
Inflation is a key factor influencing exchange rates. In Switzerland, inflation remained moderate at around 1.4% in April, thanks to the SNB's prudent monetary policy. Conversely, the Eurozone experienced higher inflation, mainly due to rising energy and food prices. This inflation difference can lead to variations in the EUR/CHF exchange rate.
In 2023, both the SNB and the ECB raised their interest rates to combat inflation. The ECB increased its rates by 200 basis points, bringing the deposit rate to 4%. These adjustments directly influence the cost of borrowing and investment, impacting the demand for respective currencies.
Divergent monetary policies between Switzerland and the Eurozone also contribute to the fluctuation of the EUR/CHF exchange rate. The SNB has opted for a conservative approach, ensuring the stability of the Swiss Franc. Meanwhile, the ECB has intensified its efforts to control inflation, causing more pronounced variations in the Euro.
By understanding these economic dynamics and following the decisions of the SNB and the ECB, you can anticipate the evolution of the CHF/EUR exchange rate for the end of 2024.
Geopolitical events significantly influence the EUR/CHF exchange rate. They must be closely monitored to anticipate exchange rate variations and adjust financial strategies accordingly. Here are some recent examples.
The United Kingdom's withdrawal from the European Union on January 31, 2020, generated substantial economic uncertainty across Europe. This uncertainty prompted investors to seek safe-haven assets like the Swiss Franc. Consequently, the Swiss Franc appreciated against the Euro during periods of negotiation and political uncertainty related to Brexit.
Unexpected outcomes in political elections within the European Union can influence investor confidence in the Euro, prompting a shift towards the Swiss Franc as a safe-haven currency. Conversely, results favoring stability and growth in Europe could strengthen the Euro relative to the Swiss Franc.
During conflicts, such as the war in Ukraine, capital moves towards stable currencies. This was evident in the early stages of the conflict, where the demand for the Swiss Franc increased, raising its value against the Euro.
By understanding these economic and geopolitical dynamics and following the decisions of the SNB and the ECB, you can anticipate the evolution of the EUR/CHF exchange rate for the end of 2024.
Sources: Swiss National Bank - Annual report 2023, European Central Bank - Economic bulletin 2023
The chart above illustrates the evolution of the EUR/CHF exchange rate over the past few years. The data shows periods of relative stability followed by marked variations during major economic events.
Sources: Swiss National Bank - Exchange rate evolution, European Central Bank - Exchange Rate Statistics
Inflation in Switzerland remained below 2%, at 1.3%. The EUR/CHF rate showed little variation after Thomas Jordan, President of the SNB, mentioned a possible reduction in interest rates to support Swiss exporters, acknowledging that "the strength of the franc poses challenges for Swiss companies".
Source: MarketScreener
The EUR/CHF rate began to rise again after hitting a low at the beginning of the year, reflecting a market adjustment to economic conditions.
The SNB lowered its key interest rate from 1.75% to 1.50% in response to declining inflation and the appreciation of the Swiss franc. This decision led to an immediate devaluation of the franc, marking the weakest quarter for the Swiss franc against the euro since 2003.
Source: SWI
The EUR/CHF rate reached 0.9776 before the ECB maintained its interest rates, thus stabilizing the Swiss franc. An Israeli attack on Iran briefly dropped the EUR/CHF rate to 0.9590, confirming the Swiss franc as a safe haven.
Source: MarketScreener
The euro strengthened against the Swiss franc, with the EUR/CHF pair reaching 0.9929 on May 27, before starting to decline.
The euro moved away from parity with the Swiss franc, dropping after its peak in May. This decline is due to rising inflation in Switzerland, the reduction of rates by the ECB, political uncertainty after the European elections, and economic concerns in the eurozone.
Sources: Swiss Federal Statistical Office, European Central Bank
The EUR/CHF exchange rate initially remained around 0.97 before suddenly dropping to 0.95 at the end of the month. This decline confirms the Swiss franc as a safe haven amid ongoing geopolitical tensions.
On August 5, 2024, the EUR/CHF exchange rate reached a record low of 0.9256 due to persistent geopolitical tensions, which strengthened the Swiss franc as a safe haven. This trend was supported by recent monetary policy decisions by central banks, particularly the interest rate adjustments by the ECB and the SNB.
The EUR/CHF exchange rate is expected to range between 0.96 and 0.98. The Swiss National Bank (SNB) has kept its key interest rate at 1.25%, which helps limit the appreciation of the franc. On September 26, 2024, the SNB reduced its policy rate to 1%, reflecting a well-managed inflation rate of 1.1%. This rate cut was designed to maintain the competitiveness of Swiss exports and prevent excessive appreciation of the Swiss Franc.
Sources: Exchangerates.org.uk, Forex - TradingCharts.com
The EUR/CHF exchange rate remained stable between 0.933 and 0.942 in October 2024, supported by the Swiss National Bank's (SNB) prudent monetary policies.
Sources : Swissinfo.ch, Swiss SNB Data
In early November, the Swiss franc could strengthen against the euro, as seen in previous year-ends. Between November and December 2023, it gained an average of 1.7% in 70% of cases. A similar increase could bring the exchange rate from 0.94 to around 0.924 by the end of December 2024.
Source : European Central Bank
With the EUR/CHF rate fluctuating between 0.936 and 0.944 in early November, showing a daily increase of 0.66% and a weekly increase of 0.95%, several analyses suggest a potential short-term appreciation of the euro against the Swiss franc.
Several expert projections indicate that the EUR/CHF rate could reach 0.93 by the end of 2024, or even 0.924 if past year-end trends are repeated.
Sources: Tradersunion, FXEmpire
The monetary policy decisions made by the Swiss National Bank (SNB) and the European Central Bank (ECB) have so far had a significant impact on the EUR/CHF exchange rate, and this will continue to be the case through the end of 2024. The SNB has maintained a policy of monetary stability, adjusting interest rates to control inflation and stabilize the Swiss Franc. The ECB, on the other hand, has raised its rates to combat high inflation in the Eurozone. These rate adjustments directly influence borrowing and investment costs, thereby impacting the demand for EUR/CHF exchanges.
Sources:
Geopolitical events, such as the war in Ukraine, conflicts in the Middle East, trade tensions between major powers, and political uncertainties in Europe, can cause significant fluctuations in the exchange rate. For instance, during times of uncertainty, the Swiss Franc is often seen as a safe haven, leading to an appreciation of the currency. International negotiations and agreements can also influence investor expectations and thus the currency market.
Sources:
The fiscal and budgetary policies adopted by the governments of Switzerland and Eurozone countries will also play a decisive role. Expansionary policies, such as increased public spending or tax cuts, can stimulate the economy but also lead to higher inflation. Conversely, austerity measures can slow economic growth but help stabilize the currency. The budgetary measures taken in response to the pandemic and the energy crisis will have lasting repercussions on exchange rates.
For cross-border workers and businesses, proactive risk management is essential to minimize the negative impacts of EUR/CHF exchange rate fluctuations.
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For the end of 2024, the exchange rates between the Euro (EUR) and the Swiss Franc (CHF) will, as usual, be influenced by several economic and political factors. The decisions of the Swiss National Bank (SNB) and the European Central Bank (ECB), geopolitical events, and fiscal and budgetary policies remain the determining factors. For cross-border workers and businesses, understanding these dynamics is essential to best anticipate money transfers and manage exchange rate risks. Although estimates and forecasts are never perfectly accurate, using appropriate financial tools and platforms like ibani, which offer the real market exchange rate, allows significant savings on exchange fees.
The EUR/CHF exchange rate is currently influenced by economic, geopolitical, and monetary factors. According to the latest forecasts, the rate could stabilize around 0.97 to 0.98 by the end of 2024, supported by moderate economic recovery in Europe and controlled inflation. However, if geopolitical tensions persist, the Swiss franc could strengthen, potentially pushing the rate closer to 0.95, as demand for this safe-haven currency increases.
The best time to exchange Swiss francs for euros depends on the exchange rate trends and your financial situation. Generally, it is beneficial to monitor market trends and make exchanges when the rate is favorable. Consulting financial experts or using forecasting tools can also help determine the optimal time for currency exchanges.
Buying Swiss francs can be a good strategy if you anticipate an appreciation of the currency due to economic uncertainty or geopolitical events. However, it is essential to consider economic forecasts and consult financial advisors before making a decision, as the currency market can be volatile and unpredictable.
The Swiss franc often rises during periods of economic or political uncertainty, as it is considered a safe-haven currency. Investors turn to the CHF to protect their assets from risks associated with more volatile currencies. Factors like prudent monetary policies of the Swiss National Bank, low inflation, and Switzerland's economic stability also contribute to the strength of the Swiss franc.
Cross-border workers regularly transfer their salaries between Switzerland and Eurozone countries. A favorable exchange rate can increase their purchasing power in euros.
Businesses can use forward contracts and currency options to lock in rates in advance, diversify their sources of income and expenses in different currencies, and use currency converters like ibani to manage conversions between their international accounts.
ibani offers low exchange rates and reduced fees, allowing you to maximize the amounts converted during currency exchanges. Additionally, the platform is easy to use and provides complete transparency on margins.
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