Swiss Franc stalls versus Euro after mixed bag of Eurozone inflation figures

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<li><strong>The Swiss Franc trades flat against the Euro after inflation data shows a decline in some metrics but a rise in others. </strong></li>
<li><strong>Annual inflation falls whilst price growth accelerated on a monthly basis.</strong></li>
<li><strong>The overall trend for EUR/CHF remains bearish with the possibility of a correction higher in the short-term.</strong> </li>
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<p>The Swiss Franc (CHF) traded flat against the Euro (EUR) on Friday after <a href="https://www.fxstreet.com/economic-calendar/country/c9822cb1-6cee-45f4-a9a2-89d136990308">Eurozone</a> inflation <a href="https://ec.europa.eu/eurostat/documents/2995521/18261481/2-05012024-AP-EN.pdf/a80f5906-6834-0dae-2eae-44ac9a59e946" target="_blank" rel="noopener">data</a> painted a mixed picture in December. Whilst inflation came out below <a href="https://www.fxstreet.com/rates-charts/forecast">forecast</a> on a year-on-year basis, it rose month-on-month. </p>
<p>European Central Bank (ECB) President <a href="https://www.fxstreet.com/currencies/eurusd">Christine Lagarde</a> adopted a hawkish stance at the last <a href="https://www.fxstreet.com/macroeconomics/central-banks/ecb">ECB</a> meeting, saying inflation pressures remained too high for the Governing Council to consider cutting interest <a href="https://www.fxstreet.com/rates-charts/rates">rates</a>. The policy echoes that adopted by the Swiss National Bank (SNB), whose Chairperson Thomas Jordan also sidestepped questions about rate cuts during his press conference on the same day.</p>
<p>Lower interest rates are negative for a currency as they reduce foreign capital inflows. </p>
<h2>Daily digest market movers: Swiss Franc trades flat versus Euro after mixed HICP data</h2>
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<li>The Swiss Franc trades flat against the Euro at the end of the week, after mixed inflation data from the Eurozone.  </li>
<li>The Harmonized Index of Consumer Prices (HICP), the ECB’s preferred gauge of inflation, came out at 2.9% in December on a year-on-year basis. </li>
<li>This was lower than the 3.0% estimated by economists but higher than the previous year’s 2.4%. </li>
<li>Core HICP also undershot expectations, registering a 3.4% gain versus the 3.5% expected and 3.6% previous.  </li>
<li>On a month-on-month basis, however, Core HICP showed a rise of 0.4% against the 0.6% decline in November. </li>
<li>Headline HICP rose by 0.2% MoM after registering a 0.6% decline in November. </li>
<li>The so-called factory gate prices, which are measured by the Producer Price Index, showed a 0.3% decline in December on month, when a fall of 0.1% had been forecast. This was also lower than the 0.3% gain of November.</li>
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<h2>Swiss Franc technical analysis: EUR/CHF in firm downtrend but with risks of a correction higher</h2>
<p>EUR/CHF – the number of Swiss Francs that one Euro can buy – shows a small recovery this week despite the overall bearish tenor of the <a href="https://www.fxstreet.com/rates-charts/chart">chart</a>. </p>
<p>The pair is arguably in a downtrend on all major time frames – long, intermediate and short-term charts. This overall bearish bias pushes the odds in favor of more downside in the future.</p>
<p><a href="https://editorial.fxstreet.com/miscelaneous/EUR_CHF%20(10)-638400549780240167.png" target="_blank" rel="noopener"><img decoding="async" alt="" src="https://editorial.fxstreet.com/miscelaneous/EUR_CHF%20(10)-638400549780240167.png" style="width: 800px; height: 357px;" /></a></p>
<p><small>Euro vs Swiss Franc: Weekly Chart </small></p>
<p>If EUR/CHF breaks below the 0.9254 lows it will likely continue falling to the next support level at the 0.9200 round number. A break below that will then usher in further weakness to 0.9100. </p>
<p>Several factors have emerged, however, which suggest the possibility of a correction higher happening first. </p>
<p>The pair has reached the oversold zone on the Relative Strength Index (RSI) which classically means short-holders should not add to their positions. If RSI exits oversold, rising back above 30, it will be a sign the pair will rise and for traders to buy. </p>
<p>Secondly, the pair has reached the lower trendline of a descending channel. This is likely to provide technical support to price and could be the springboard for a recovery back up towards the upper channel line at roughly 0.9500. </p>
<p>Nevertheless, the pair is below its three major Simple Moving Averages – the 50, 100 and 200 and continues making lower lows and lower highs, which suggests any recovery may be short lived before the dominant downtrend resumes.</p>
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<h2>Swiss Franc FAQs</h2>
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<p>The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.</p>
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<p>The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.</p>
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<p>The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.</p>
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<p>Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.</p>
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<p>As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.</p>
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<br /><a href="https://www.fxstreet.com/news/swiss-franc-stalls-against-euro-after-mixed-inflation-data-from-the-eurozone-202401051241">Source link </a></p><p>The post <a href="https://forextraderhub.com/swiss-franc-stalls-versus-euro-after-mixed-bag-of-eurozone-inflation-figures.html">Swiss Franc stalls versus Euro after mixed bag of Eurozone inflation figures</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>