The Euro (EUR) has weakened against the Swiss Franc (CHF) as traders respond to comments from European Central Bank (ECB) officials, with little data on the calendar. The EUR/CHF pair is trading around 0.9330 after reaching an earlier high of about 0.9350, its peak since December 17. ECB Vice-President Luis de Guindos highlighted geopolitical tensions as a risk to growth, mentioning that uncertainty isn’t fully reflected in market prices. Meanwhile, ECB Governing Council member Mārtiņš Kazāks pointed out balanced risks to the outlook, despite high uncertainty, and reiterated the ECB’s commitment to its inflation goals.

France’s Budget Deficit

François Villeroy de Galhau from the Banque de France warned that France’s budget deficit could negatively impact perceptions if it exceeds 5% of GDP next year. The deficit decreased to EUR 155.4 billion in the first 11 months of 2025, down from EUR 172.5 billion in the previous year. Now, the focus is on inflation data from France and Spain, along with Eurozone Industrial Production and Trade Balance figures coming out this Thursday. These economic indicators, along with ECB rate policies, greatly affect the Euro’s value. Typically, higher interest rates are beneficial for the Euro, and a positive Trade Balance would further support it. Currently, ECB officials are signaling caution, which is slowing the Euro’s recent rise against the Swiss Franc. This decline from the 0.9350 level suggests we should be wary of further significant gains for now. Derivative strategies should consider this potential resistance as well as a possible downturn.

Anticipation of Economic Indicators

This cautious approach from the ECB is no surprise given recent data. For example, December 2025 Eurozone HICP inflation dipped slightly to 2.1%, getting closer to the ECB’s target and easing the pressure for quick rate hikes. Additionally, German factory orders unexpectedly fell by 0.5% in the last reported month, signaling a possible economic slowdown that weighs on the Euro. Tomorrow’s inflation numbers from France and Spain, as well as the Eurozone industrial production figures, are highly anticipated. We can expect increased volatility around these releases, making short-term option strategies like straddles appealing for capitalizing on sharp movements in either direction. Persistent inflation could shift the current cautious sentiment, while weak production figures would strengthen the slowdown narrative. It’s also important to recall the warning from the Banque de France Governor late last year about France’s budget deficit. Even though the deficit narrowed throughout much of 2025, the risk of exceeding 5% of GDP in 2026 is still a concern for Euro stability. This longer-term risk suggests keeping protective put options on the Euro against major pairs as a hedge. Create your live VT Markets account and start trading now.

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