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94 centimeters. That’s how much one euro was worth at Wednesday’s new record low. The euro stabilized at just under 95 centimeters on Thursday.
Ten years ago this was unthinkable. At that time, the value of the euro was still above 1.20 francs. At the beginning of 2015, Switzerland abolished the minimum exchange rate for the euro. After a temporary collapse, the common currency stabilized between 1.00 and 1.20 for several years. Last year the euro appreciated below the franc for the first time.
If you look at the long-term forecasts of the Economic Forecast Agency, it becomes immediately clear: the recent price declines were just the beginning. The euro is expected to continue its decline. It may fall below the 90 centimeter limit starting next May. But how realistic is this?
“It is very likely that the euro will continue to fall. In the future it may even fall below 90 centimeters,” confirms Alexandra Janssen (33), monetary policy expert at the technology and investment consultancy Ecofin. This is, among other things, a simple law of nature: Eurozone Since inflation in Switzerland is much higher than in Switzerland, the euro will continue to lose value. “This situation will change if inflation in the euro zone recovers again,” Janssen continued. Inflation in the euro zone in September was 4.3 percent. In Switzerland, it was 1.7 percent. It is in a much better position with inflation of 20.
Franconia as a safe haven
It is not only the weakness of the euro but also the strength of the franc that is behind the euro’s current decline. “Frank is perceived as a safe haven in times of crisis,” explains Janssen.
After the outbreak of war in Israel, Frank initially did not react much. “But the risk of escalation is increasing and people are becoming more aware of this,” the expert continued. Therefore, the strength of the franc will currently contribute more to the collapse of the euro against the franc than the weakness of the euro.
Janssen also says: “After all, you can’t predict currencies.” The current interest rate environment and inflation are making things more volatile and therefore harder to predict.
US bank JPMorgan expects the euro to fall to $1 by the end of the year. The price is currently still $1.05. This means the euro will continue to weaken against the Swiss franc.
Deutsche Bank was much more cautious in its assessment: at the beginning of October, it assumed that the euro would appreciate against the franc in the next half year, reaching 0.98. Experts at UBS are of a similar opinion: They expect a rate of 97 cents by the end of the year and 98 cents by June next year.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
