2024-2025 Outlook: Where is the Euro-Swiss Franc forecast heading?

The Swiss Franc consolidates its strength against the euro

Throughout 2023 and into 2024, the currency market has witnessed a notable movement: the Swiss franc has recovered levels not seen since 2015, establishing itself as one of the most resilient assets in the Western financial landscape. This revaluation is not accidental but the result of fundamental economic factors that position the Swiss currency in a privileged spot compared to its main competitors, especially the euro.

The current context shows a stark contrast between the Swiss and European economic situations. While the European Union struggles with persistently high inflation and unprecedented geopolitical uncertainty, Switzerland has managed to maintain remarkable stability. These structural elements suggest that the euro/Swiss franc forecast for the coming months points toward a continuation of the bullish trend for the Swiss franc.

Economic dynamics explaining the franc’s strength

Inflation: The decisive gap

The inflation differential between Switzerland and the Eurozone is one of the most solid pillars supporting the euro/Swiss franc forecast. While the Eurozone experienced inflation peaks close to 10% at the end of 2022 and early 2023, Switzerland kept its inflation below 3% during critical energy crisis moments. This divergence is not temporary.

Currently, although both regions have managed to reduce inflationary pressures, the gap remains relatively constant: the Eurozone shows inflation below 3%, but Switzerland hovers just around 1%. This consistency in the price gap is fundamental to understanding why the Swiss franc continues to gain ground. European investors, aware that purchasing power erodes more quickly in euros than in francs, have channeled resources into the Swiss currency as a wealth protection mechanism.

Monetary policy: The interest rate differential

The interest rate strategies adopted by both monetary authorities reflect very different positions. The European Central Bank maintains rates between 4% and 4.50%, a high level designed to contain inflation but which simultaneously hampers economic growth. Germany, for example, is on the brink of recession due to this environment of restrictive rates.

Switzerland, on the other hand, has established a much more moderate regime with rates at 1.75%, allowing the franc to strengthen without sacrificing economic dynamism. This differential of nearly 270 basis points is not secondary: it explains why there is a constant flow of capital from the Eurozone to Switzerland in search of risk-adjusted real returns.

The euro/Swiss franc forecast must consider that if the Eurozone reduces its rates to revive the economy (something that seems inevitable in the time horizon), inflationary pressures could re-emerge, again boosting demand for Swiss francs as a safe-haven asset.

Scenarios for the euro/Swiss franc forecast for 2024-2025

Projecting movements in the EUR/CHF pair requires considering multiple trajectories. Analysis of different macroeconomic contexts reveals that almost all favor the Swiss franc, albeit to varying degrees.

Scenario 1: Gradual normalization in Europe
If geopolitical stability is restored and the Eurozone manages to reestablish more normal economic conditions, the Swiss franc would be around 1.00-1.05 euros per unit. Even in this relatively favorable euro scenario, the franc would maintain levels reached during 2015-2016.

Scenario 2: Neutral environment with moderate volatility
This is probably the most likely short-term scenario. Geopolitical pressures persist but without dramatic escalations, and the European economy stabilizes without significant growth. Under these conditions, the euro/Swiss franc forecast suggests values between 1.10 and 1.12 euros per franc. This range represents an intermediate position where both currencies coexist without radical changes.

Scenario 3: European deterioration with safe-haven demand
If geopolitical tensions worsen or new economic crises emerge in the Eurozone, the Swiss franc could reach or surpass 1.18-1.22 euros per unit. This movement would reflect a massive capital exodus toward Switzerland as a safe haven.

Technical analysis: The long-term trend prevails

Beyond short-term fluctuations, the long-term EUR/CHF chart shows an unmistakably bullish trend for the Swiss franc. During 2023, the Swiss currency accumulated sustained gains, starting 2024 with normal corrections in January and February that reflected temporary profit-taking, not a fundamental trend change.

Moving averages and other technical indicators reveal that these pullbacks have been limited, suggesting that buying pressure on the franc remains persistent. It is plausible that the EUR/CHF pair will break the psychological barrier of 1.10 during 2024, considering both economic fundamentals and market mechanics.

The Swiss franc in the context of global currencies

When compared to other major reference currencies, the Swiss franc’s relative performance is notable. The US dollar has weakened, the Japanese yen faces structural difficulties, and the euro struggles with its own challenges. In contrast, the Swiss franc emerges as a higher-quality safe haven.

However, it is important to recognize that emerging Asian markets like Singapore and China are gaining relevance. The Singapore dollar (SGD) and the Chinese yuan (CNY) represent growing alternatives for investors seeking geographic diversification. These competitors do not eclipse the Swiss franc’s position but suggest that a prudent diversification strategy should consider multiple jurisdictions.

Summary: The euro/Swiss franc forecast as an investment compass

Synthesizing the analysis, the euro/Swiss franc forecast for 2024-2025 points toward a structurally strengthened Swiss franc. The elements supporting this conclusion are:

Advantages for the Swiss franc:

• Controlled inflation (1% versus 3% in the Eurozone)
• Moderate interest rates without sacrificing competitiveness
• Contained debt burden
• No significant military commitments
• Unparalleled institutional stability

Risk factors or limitations:

• Dependence on European economic dynamism
• Emergence of more dynamic Asian competitors
• Potential volatility if geopolitical tensions escalate

For European investors seeking to protect their wealth, the Swiss franc represents a more solid alternative than holding excessive euro exposure during these uncertain times. It is not a permanent position but a smart hedge while European volatility persists. The euro/Swiss franc forecast suggests that this comparative advantage of the franc will remain valid throughout the 2024-2025 cycle.