EUR/CHF holds firm as Eurozone PMI softens and SNB maintains a guarded stance

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The Euro (EUR) pares back some of its early losses against the Swiss Franc (CHF) on Friday as the pair steadies following the release of preliminary Eurozone Purchasing Managers Index (PMI) data. At the time of writing, the cross is trading around 0.9290, bouncing off an intraday low of 0.9276.

EUR/CHF steadies near 0.9290 as the Euro pares early losses following preliminary Eurozone PMI data.
Eurozone PMI signals mixed but softer momentum, with manufacturing slipping back into contraction
SNB commentary remains hawkish-leaning, with policymakers maintaining a high bar for negative rates.

Eurozone PMI figures offered a mixed but overall softer signal for November. The HCOB Composite PMI slipped to 52.4 from 52.5, missing expectations. While the Services PMI climbed to an 18-month high at 53.1, coming in above forecast, the manufacturing sector continued to struggle, with the Manufacturing PMI falling back into contraction at 49.7, below the 50.2 consensus and the prior 50 reading.

The weakness was more pronounced in Germany, where PMI numbers undershot forecasts across the board. The Composite PMI cooled sharply to 52.1 from 53.9, while Manufacturing PMI fell deeper into contraction at 48.4 and Services eased to 52.7, both well below expectations. The data signalled fading growth momentum in Europe’s largest economy, with new orders contracting and employment declining at a faster pace.

In contrast, France showed signs of stabilisation as the Composite PMI improved sharply to 49.9 from 47.7, supported by the first expansion in services activity in 15 months. However, French manufacturing weakened further to 47.8, keeping the overall backdrop fragile.

Comments from European Central Bank (ECB) officials on Friday did little to lift sentiment around the Euro. President Christine Lagarde reiterated that the ECB is “playing its part by delivering price stability” and stressed that policymakers “will continue to adjust policy as needed” to keep inflation on track toward the target. Vice President Luis de Guindos echoed this stance, noting that the current level of interest rates is “appropriate” and highlighting continued moderation in services inflation.

In Switzerland, comments from Swiss National Bank (SNB) officials reinforced the central bank’s cautious stance. Chairman Martin Schlegel noted that the bar for returning to negative interest rates remains “high,” but emphasized that the SNB is prepared to cut rates if necessary. SNB Board Member Petra Tschudin added that inflation is likely to rise slightly in the coming quarters. The SNB will deliver its next interest rate decision in December, with analysts widely expecting the central bank to keep rates unchanged at 0%.

SNB FAQs

What is the Swiss National Bank?

The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.

How does the Swiss National Bank interest-rate policy affect the Swiss Franc?

The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive 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.

Does the Swiss National Bank intervene in the forex market?

Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.

When does the Swiss National Bank Governing Council decide on monetary policy?

The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.