EUR/CHF stays near 33-week peak, heads for weekly gain

The EUR/CHF currency pair held in proximity to a 33-week high of 0.9648 on Friday, as investors continued to monitor closely any developments regarding Germany’s fiscal policy.

Politico reported earlier on Friday that Germany’s Chancellor-in-waiting Friedrich Merz had reached a breakthrough with the Greens on a substantial spending plan for defense and infrastructure.

The Euro has gained more than 1.2% against the Swiss Franc so far this week on signs that Germany’s political landscape is moving towards greater fiscal flexibility.

Statements from key figures within the Greens Party have suggested a willingness to negotiate a raise in state borrowing to bolster defense capabilities and stimulate economic growth. This prospect has led to renewed confidence in the Euro Area’s economic outlook.

According to Rabobank forex strategist Jane Foley, the prospect of bolstered fiscal spending could reduce demand for safe haven currencies such as the Swiss Franc.

A weaker Franc would be “a relief to Swiss National Bank policymakers and strengthens the likelihood that the SNB will be able to avoid cutting interest rates to zero or even into negative territory,” Foley stated in a note.

The EUR/CHF currency pair was last up 0.85% to trade at 0.9646.

Rabobank has revised up its year-end forecast for EUR/CHF to 0.97 from 0.95 previously.