Euro (EUR) Exchange Rate Declines as German MPs Vote on Greek Bailout Terms
The Euro to Swiss Franc (EUR/CHF) exchange rate softened by around -0.3% on Wednesday morning.
German MPs gather today to vote on the terms for Greece’s third bailout deal. Thus far, several Euro-area nations have voted to accept the deal which has bolstered trader confidence in the German vote. Whilst most economists are confident that Germany will vote in favour of the bailout, Chancellor Angela Merkel is likely to face rebellion in her own party. Many officials have been very vocal in their dislike for Eurozone bailouts and the German contribution accounts for the largest proportion of Greece’s debt. Optimistic Greek MPs looking for a debt haircut are likely to remain disappointed as German Finance Minister Wolfgang Schäuble reiterated the fact that debt relief is against European law.
European economic data produced mixed results on Wednesday, but the publications have had minimal impact on the Euro thus far. This is likely to be because trader focus is dominated by Greece’s geopolitical developments. With a large European Central Bank (ECB) repayment due tomorrow, the Hellenic nation will be hoping that the German’s will vote yes so they can unlock funds in time.
The Euro to Swiss Franc (EUR/CHF) exchange rate is currently trending in the region of 1.0753.
Swiss Franc (CHF) Edges Higher on Safe-Haven Demand
Although tensions regarding Greece and China have eased over the past few weeks, trader risk-appetite is still comparatively subdued. This is due to continued commodity bearishness, the global economic slowdown and mounting fears that Beijing will not continue to prop up China’s equity market. With the US asset less desirable ahead of domestic inflation data and Federal Open Market Committee (FOMC) minutes, the Swiss Franc edged higher thanks to its safe-haven qualities.
Gold prices edged higher in the early stages of Wednesday’s European session which aided the Franc’s appreciation. This is due to uncertainties regarding the tone of the forthcoming FOMC minutes. Should Fed policymakers hint at a near-term rate hike, gold prices will likely plummet.
Additional Franc gains can be attributed to speculation that losing $51 billion in half a year may not be an issue for the Swiss National Bank (SNB). ‘From a monetary point of view, the loss does not matter,’ said Maxime Botteron, economist at Credit Suisse Group AG. ‘The SNB can still operate with negative equity.’ However, some economists are less convinced amid fears that the negative interest rate limits the SNB’s chance for market intervention. The loss ‘limits the credibility of the SNB to pursue a monetary policy that might come with short term financial losses,’ Economist Karsten Junius said. ‘Unlimited foreign-currency interventions are therefore not credible as markets would regard them as unsustainable.’
The Euro to Swiss Franc (EUR/CHF) exchange rate dropped to a low of 1.0750 today.
Euro to Swiss Franc (EUR/CHF) Exchange Rate Forecast to Recover on German Vote
Given that most economists are confident that Germany will vote to accept the Greek’s bailout package, the Euro to Swiss Franc (EUR/CHF) exchange rate has the potential to recover losses over the course of Wednesday’s European session. The North-American session could see EUR/CHF volatility, however, with the publication of FOMC minutes. Should the minutes prove hawkish in tone, gold prices may fluctuate which could see the Franc extend losses versus its major peers.
Thursday may be of interest to those invested in the EUR/CHF pairing. Swiss Trade Balance for July has the potential to provoke changes for the ‘Swissie’ (CHF). European data is unlikely to be particularly impactful on Thursday given that traders will be focussed on whether or not the Hellenic nation will be in a position to repay the ECB in time.
The Euro to Swiss Franc (EUR/CHF) exchange rate climbed to a high of 1.0802 during the early stages of Wednesday’s European session.