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2021/02/03 / Erste Group Research

EURCHF - Inflation outlook poses short-term risk

After a significant rise from around November last year, the euro has had to give up some of its gains since the beginning of the new year. The reasons for this included profit-taking, but certainly also the prospect of further economic packages in the US after the Democrats gained a majority in the Senate. We expect a sideways movement in the coming months.

The yen has remained in a trading range between 125 and 126.5 against the euro over the past two months. With the deployment of effective vaccines and thanks to fiscal and monetary support, we expect the economic recovery to continue in 2021. In this environment, demand for safe-haven assets like the yen usually suffers.

Due to special effects as well as a significant increase in energy prices, we expect a strong increase in the inflation level of the Eurozone in 1Q21. As a result, the inflation differential to Switzerland will widen strongly. While in recent years the EURCHF exchange rate has hardly reacted to short-term fluctuations in the inflation differential, this nevertheless poses a downside risk to the euro in 1Q21.

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General information

AuthorErste Group Research
Product nameForex News
Topic in focusFX, Macro/ Fixed income
Economy in focusJapan, Switzerland, United States
Currency in focusSwiss Franc, US Dollar
Sector in focus-


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