Swiss Franc Outlook Against the Euro in 2024: An Opportunity for Investors?

The Economic Context: Why the Swiss Franc Is Gaining Ground

The current macroeconomic landscape presents a particularly favorable scenario for the Swiss franc. While the Eurozone battles inflation still hovering around 3%, Switzerland has managed to keep its CPI figures just below 1%. This gap, maintained over the past twenty-four months, explains much of the Swiss franc’s current strength.

The appreciation of the Swiss franc is backed by solid fundamentals. Swiss monetary authorities have opted for a more moderate interest rate policy, keeping rates at 1.75%, which contrasts significantly with the 4% to 4.50% rates prevailing in the Eurozone. This interest rate differential encourages investors to view the Swiss franc as a safe haven for their assets.

Additionally, Switzerland maintains a more flexible fiscal position than its European neighbors. While EU countries have seen their public debt levels soar, the Alpine nation has contained its financial commitments, reinforcing confidence in its currency as a store of value.

EUR/CHF: Exchange Rate Analysis

Just a decade ago, EUR/CHF traded below 1.00, which seemed to be an almost insurmountable floor. However, recent trends have pushed the pair to highs not seen since 2015. The Swiss franc has experienced a steady revaluation throughout 2023 and has continued this upward movement in 2024.

The technical trend of the EUR/CHF pair shows two correction attempts so far in 2024, particularly in January and February. Nonetheless, these pullbacks should be interpreted as normal consolidations within a prevailing bullish trend for the Swiss franc, rather than signs of structural weakening. Investors who took defensive positions in Swiss francs during the energy crisis are gradually repositioning, generating these tactical movements.

Looking at the medium-term behavior of the pair, the psychological resistance of 1.10€ per Swiss franc appears to be the next natural target. Considering underlying economic factors, it is reasonable to expect this barrier to be surpassed during 2024. More bullish scenarios project levels of 1.15€ and even 1.20€ if European geopolitical uncertainty intensifies.

Swiss Franc Projections: Scenarios for 2024-2025

Constructing scenarios is particularly complex in the current environment, characterized by persistent geopolitical tensions and divergent economic dynamics. However, three probable trajectories for EUR/CHF can be outlined:

Bullish Scenario (Unfavorable for the Eurozone): If geopolitical risks materialize or the European economy faces new disruptions, the Swiss franc could appreciate significantly. Projections in this case place EUR/CHF at 1.18 by the end of 2024 and 1.22 in 2025.

Baseline Scenario (Gradual Normalization): With relative European stabilization, the pair would move more orderly toward 1.10€ in 2024 and 1.12€ in 2025, reflecting improvements in EU inflation figures.

Defensive Scenario (EU Economic Improvement): If the Eurozone manages to resume growth with controlled inflation, EUR/CHF could find support between 1.00 and 1.05€, though decisively breaking these levels seems unlikely in the medium term.

In almost all these scenarios, the Swiss franc maintains a strong defensive position, underscoring its appeal as a capital preservation currency.

Interest Rate Dynamics and Their Implications

Divergent monetary policies between Switzerland and the Eurozone are fundamental to understanding the strength of the Swiss franc. The European Central Bank has maintained restrictive rates to combat inflation, but this approach has begun to show cracks. The European economy, especially Germany, exhibits signs of weakening.

Switzerland, on the other hand, has reached a balance: sufficiently high rates to anchor inflation expectations without stifling growth. This “sweet spot” in monetary policy reinforces the attractiveness of the Swiss franc among global portfolio managers.

When the Eurozone finally reduces its interest rates—something that seems inevitable—it could generate a new upward impulse for the Swiss franc. Investors are already anticipating this move and positioning accordingly.

Comparison: Swiss Franc versus Other Safe-Haven Currencies

Although the Swiss franc remains a solid defensive option, it is no longer the only one on the radar of sophisticated investors. The Japanese yen has lost its shine due to persistently low rates in Japan, eroding its historical appeal. The US dollar, despite its initial strength, also faces long-term uncertainties.

Alternative emerging currencies like the Singapore dollar and the Chinese yuan are gaining weight in defensive allocations. However, these options involve geopolitical and country risk considerations that differ from the Swiss profile. For investors seeking a “pure” safe-haven currency without military commitments or regional tensions, the Swiss franc remains irreplaceable.

Investor Recommendations: Increase Exposure to the Swiss Franc?

The case for increasing positions in the Swiss franc is solid but nuanced. For those with euro-denominated portfolios, a small defensive allocation in Swiss francs acts as a buffer against uncertainty. The recent appreciation has already rewarded early entrants, but tactical opportunities still exist in minor corrections.

Diversification remains best practice. Avoid concentrating all defensive exposure in a single asset, even if the Swiss franc presents attractive prospects. A balanced portfolio could include moderate positions in Swiss francs, complemented by other high-credit-quality currencies and low-risk government fixed-income assets.

For traders, EUR/CHF offers enough volatility to exploit in the short term, especially around resistance levels and economic data from both jurisdictions.

Conclusion: The Swiss Franc as a Defensive Pillar in 2024

The trajectory of the Swiss franc is driven by solid and enduring fundamental factors: inflation differentials, more cautious monetary policies, fiscal strength, and the absence of costly military commitments. These characteristics will not disappear in 2024 or 2025.

The EUR/CHF pair is likely to continue its upward trend, with the Swiss franc gaining ground as the Eurozone navigates its complexities. For investors and portfolio managers, the Swiss franc stands out as a reliable defensive option in an environment of persistent uncertainty.