Amid softer oil prices and German manufacturing momentum, Euro holds steady against Swiss Franc

• The Euro could gain ground as cheaper oil eases energy pressures in the wake of the US midterm election results.
• The EUR outlook receives support from a recovery in German factory orders and hawkish ECB remarks on rate increases.
• Gains in the Swiss Franc following an unexpected rise in inflation constrain the potential upside in EUR/CHF.

Trading near 0.9170 in Thursday's European session, EUR/CHF has recouped its intraday losses but remains unchanged on the day. Support for the Euro (EUR) from lower crude oil prices could lend upward momentum to the cross. A Democratic sweep in the US midterm elections prompted a decline in oil prices, as expectations grew that the Trump administration would come under greater pressure to bring the conflict with Iran to an end. While acknowledging that the war and higher petrol prices were largely responsible for Republican election losses, President Donald Trump indicated that he had no immediate plans to intensify military strikes.

Signs of fresh momentum in the region's largest economy could offer additional support to the Euro. German Factory Orders increased 3.3% year-on-year in September, compared with the previous month's revised rise of 3.2%. Monthly orders for German-manufactured goods recovered by 4.4% after August's steep 10.1% fall. The rebound nevertheless missed the forecast of 4.8% growth.

Hawkish remarks from European Central Bank (ECB) officials also lent support to the Euro. Officials suggested that further interest rate increases may be necessary to curb inflation and avert a wage-price spiral.

Strength in the Swiss Franc (CHF), however, leaves EUR/CHF exposed to downside risks. An unexpected acceleration in Swiss annual inflation to 1.5% in October has raised questions over whether the Swiss National Bank (SNB) can refrain from monetary tightening through 2027.

Could a hawkish SNB shift draw buyers to the Franc and weigh on EUR/CHF?

For ING analysts, a move towards a more hawkish SNB position is “quite a clean positive for the Swiss franc,” with the analysts noting that “traders will remember 2023, when the SNB actively drove the franc stronger and sold FX as part of its tightening toolkit.” In this context, they “expect to see even more interest in the Swiss franc over the coming months, with downside risks to EUR/CHF forecasts.”