EBC Markets Briefing | Euro eyes parity with Swiss franc again

The euro hit its highest level since late November against the Swiss franc on Wednesday as yield differentials have outweighed inflation fears that beset investors over the past few years.

The eurozone’s monthly trade surplus rose to a record high of €28 billion in January on a seasonally and calendar-adjusted basis thanks to a sharp drop in the price of energy imports and an uptick in exports.

The similar improvement in Germany’s balance of trade bodes well for the bloc’s economy as it underlines how the huge terms of trade shock caused by Russia’s invasion of Ukraine is being unwound.

The German ZEW Economic Sentiment Index jumped from 19.9 in February to 31.7 in March, well above economist forecast for a reading of 20.5. China’s economy gets off to a good start – a positive sign of demand.

The SNB will wait until at least June before interest rate cuts, according to economists polled by Reuters, who said it would make shallower cuts this year than the Fed and the ECB.

The franc has slid around 5.55% so far this year and some say unexpectedly cutting rates ahead of other major central banks could cause it to weaken further. In December, the central bank said intervention was no longer necessary.

The euro has seen a sustained rally from the beginning of this year against the safe-haven currency, within striking distance of strong resistance at 0.9700. The initial level of support sits at the 200 SMA.

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