The euro strengthened against the Swiss franc on Thursday, with EUR/CHF trading near 0.9230 after bouncing from an intraday low of 0.9198. The move came after revised Eurozone inflation figures for March pointed to stronger price pressures, reinforcing expectations that the European Central Bank (ECB) will tread carefully at its April 29–30 policy meeting.
Across broader foreign exchange markets, the euro rose 0.16% against the US dollar, gained 0.39% versus the Australian dollar and advanced 0.21% against the Swiss franc. It posted its largest gains against the New Zealand dollar during the session.
Inflation hits highest level since July 2024
Revised data showed the Harmonized Index of Consumer Prices (HICP) rose 1.3% month-on-month in March, up from 0.6% in February and above the earlier 1.2% estimate. On an annual basis, headline inflation climbed to 2.6%, the highest reading since July 2024 and well above the previous 1.9%.
Core inflation, excluding energy and food, was revised down slightly to 2.3% year-on-year from the earlier 2.4% estimate. The figures indicate that higher energy costs were the main driver of the rise in headline inflation.
These numbers leave inflation above the ECB’s 2% target and complicate the outlook for interest rates, feeding expectations that the central bank will maintain a cautious tone rather than immediately shifting policy.
ECB weighs rate path amid mixed signals
The ECB will review the latest inflation data at its April 29–30 meeting, while minutes from its March 19 gathering, due later Thursday, are expected to shed light on policymakers’ assessment of price pressures and the timing of any rate adjustments.
Earlier this week, ECB President Christine Lagarde said the bank must stay flexible on rates, with markets still expecting two 25-basis-point hikes this year. Current market pricing suggests a low probability of a move in April but almost fully anticipates a hike by June.
Lagarde has recently warned that risks to the inflation outlook are tilted to the upside and noted the bank is on “higher alert,” reflecting concern about persistent price pressures driven by energy costs and geopolitical instability.
Policy debate inside the governing council
Bank of France Governor François Villeroy de Galhau has pushed back against expectations of an imminent move, arguing that it would be “premature” to focus on an April rate hike and that there is “no rush” to act. He stressed that any decision on tightening depends on incoming data and that no path for rates has been predetermined.
His comments highlight an emerging divide within the governing council between those emphasizing upside inflation risks and those urging patience. That split increases the importance of the March monetary policy account, which previously confirmed that policymakers want to preserve flexibility to respond to potential shocks.
Eurozone data paint uneven economic picture
Recent economic releases from the Eurozone present a mixed backdrop for the ECB.
The S&P Global Eurozone Manufacturing PMI for March climbed to 51.6, signaling expansion in the sector for the first time in months and suggesting some recovery in industrial activity.
At the same time, sentiment indicators and hard data point to ongoing fragility. Germany’s ZEW Indicator of Economic Sentiment fell sharply to -0.5 in March, with the deterioration widely linked to escalating tensions in the Middle East and a more uncertain global outlook.
The Eurozone labor market also showed a hint of softening. The seasonally adjusted unemployment rate edged up to 6.2% in February from 6.1% in January. Industrial production in the bloc dropped 0.6% year-on-year in February, underlining that parts of the economy remain under pressure despite pockets of resilience.
SNB faces subdued growth and currency strength
On the Swiss side, minutes from the Swiss National Bank’s (SNB) latest meeting pointed to a more uncertain economic outlook, shaped in part by geopolitical risks in the Middle East. The SNB projects GDP growth of around 1% in 2026 and about 1.5% in 2027, while acknowledging that current momentum is subdued.
The central bank noted that the recent strength of the franc has tightened financial conditions. It expects inflation to rise temporarily due to higher energy prices before easing again and staying in line with its medium-term target.
The SNB judged its current policy stance as appropriate and left its rate at 0% at its March assessment. Officials in Zurich reiterated that their readiness to intervene in foreign exchange markets has increased to counter any rapid and excessive appreciation of the franc. The immediate reaction in currency markets to the SNB minutes was muted.
Diverging policy paths in focus
With the ECB debating possible tightening and the SNB signaling a willingness to lean against further franc strength, traders are watching for signs of policy divergence that could drive larger currency moves in the coming weeks.
Attention now turns to the ECB’s monetary policy account due later Thursday and a series of speeches from central bank officials, which are expected to shape expectations for the euro area’s rate path.
Next week’s release of the ZEW Economic Sentiment survey for April on April 21 will provide another test of confidence in the Eurozone outlook, potentially influencing how both ECB communication and market pricing evolve.
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