The euro is weaker than it has been for 7 years (1.0385 CHF per 1 EUR), inflation is near inexistent (1.5%) [Translation of the article in comment]
The euro is weaker than it has been for 7 years (1.0385 CHF per 1 EUR), inflation is near inexistent (1.5%) [Translation of the article in comment]
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And then it happened. The euro fell below the 1.04 franc mark on Friday. The European single currency hasn’t been this weak in seven years. And yet experts say that’s okay. The Swiss National Bank can afford to do nothing, they say. In other words, not to intervene to support the euro.
That’s surprising at first. Because you have to go back to 2015 to find a lower euro closing rate. At that time, the Swiss National Bank had lifted the minimum exchange rate against the euro. The euro fell to parity with the franc. Queues formed in front of the banks. Everyone wanted to buy euros cheaply. The boom in shopping tourism took its course. The export industry, tourism and retail trade groaned under the loss of competitiveness.
Today, seven years later, Switzerland is in the midst of a corona crisis. The number of cases seems to be rising inexorably. Hospitals are threatened with overload. The staff appeals to the population. The Federal Council must again impose restrictions that could weaken the economy. Germany has declared Switzerland a high-risk area.
And to make matters worse, the euro is now weakening and the franc is appreciating. This makes Swiss services and products more expensive, which are in fierce competition with foreign rivals: in industry, in tourism, in gastronomy close to the border or in retail trade.
Why hasn’t the Swiss National Bank helped the economy so far?
Because the economy is doing just fine without the help, says Maxime Botteron, an economist at the major bank Credit Suisse. There is one important reason for this: inflation in the euro zone is currently much higher than in Switzerland. And that in turn means nothing other than that products and services in the euro zone are becoming more expensive more quickly than in Switzerland.
So, for example, industry in the eurozone gets a disadvantage in terms of price, while Swiss industry gets an advantage. The same is true for tourism. Life in the eurozone tends to become more expensive for foreign tourists. Life in Switzerland does too, but less so than in the euro zone, making Switzerland more attractive in terms of price.
So there are two effects. The weaker euro helps eurozone industry compete with its Swiss rivals. But higher inflation in the euro zone is hurting it. If the two effects are offset against each other, the bottom line is that not much has happened – even with the recent bout of weakness in the euro. Economist Botteron says: “The two effects roughly balance each other out. Overall, the Swiss economy can live well with it.”
Inflation has actually been much higher in the eurozone than in Switzerland recently. In the eurozone, prices were 4.9 percent higher in November than a year earlier. That was the highest inflation rate since the euro came into existence, the European Union’s statistical office, Eurostat, reports. In Germany, it was as much as 6 percent. In Switzerland, prices went up only 1.5 percent, four times less. Botteron comments:
“Switzerland really doesn’t have to worry about inflation now.”
In addition, the economy recovered surprisingly quickly from the corona shock. So far, the new Omikron variant has done nothing to change that. Swiss GDP is already higher than it was before the crisis. Industry in particular is benefiting from strong foreign demand. And in the euro zone, unemployment is below pre-crisis levels. According to analysts, economic indicators point to “high growth momentum.
I deposited EUR 1000 at the bank on Friday. I grabbed my phone to check the conversion rate after the cash machine stated I’d get CHF 1020 for that as I couldn’t believe it. While I did, the damn thing swallowed my bank card for waiting too long. A security measure as per the bank clerk…
6 percent inflation in Germany? Fucking hell that’s a lot. Glad my savings aren’t disappearing at this rate.
This is just the result of massive inflation in EU. Nothing to worry about (unless you are in EU).
It will make your CHF worth more EUR but also things will get more expensive in EUR.
I never really understood how this is somehow bad for exports. A weaker EUR means for Europeans it’s more expensive to buy anything locally or imported.
Me, at first: MWHAHAHAHAW! Switzerland so strong!
Me, thinking about our export oriented economy: Oh, no…
Very good for consumers! That means you can buy things in EUR online for less and also go shopping in the EU zone and save money. Glad CHF is a strong currency.
So if I want to transfer CHF from my Swiss bank to euro in my French bank, now is the time?
I remember the 2015, that was quite a fall (or up?) In the rates.
official inflation doesn’t use the “how much it cost to buy a house with CHF” Don’t let your CHF sleeping at the bank because of this kind of news.
Had originally planned to transfer money from Euro to CHF in the coming days. Just literally “lost” 5% of my savings that I have in Euros.
In terms of investing. Given that the euro is losing value against the CHF, and that the CAC40 and DAX have been losing value for 3, resp 6 months, does it mean it’s a good time to invest into European indices?
Convert CHF into EUR, get more EUR than usual so can buy more EUR positions, which are even cheaper than usual.
CHF is an awesome currency! I see no reason why it can’t be stronger than EUR. Not to mention ECB is trying to lower it to get an advantage on exports. For all I know CHF could reach parity with GBP.