Spread Betting EUR/CHF

Although they are so close together physically, the currencies of Switzerland and the surrounding European nations in the European Monetary Union can act in very diverse manners. The euro is pegged to the fortunes of 17 European countries, of which Germany is the largest economic influence. Several of the countries using the euro have had economic crises recently, notably Greece and Italy. On the other hand, Switzerland has always kept a tight rein on its economy, with its central bank stepping in to prevent too much inflation and too much appreciation of the Swiss franc against other currencies.

Having said that, the Swiss economy is closely related to Europe, with 80% of its trade taking place with these partners. The landlocked nation is heavily dependent on imports and exports. Switzerland usually manages to maintain a trade surplus, contributing to the health of its economy and making it more difficult for the central bank to control speculation in the currency. At present the country’s interest rate is pegged at zero to make the Swiss franc relatively unattractive. This makes the euro inherently more appealing, to counterbalance the attractiveness of the solidity of the Swiss currency investment.

The euro is a more difficult currency to track in terms of news events, because of the number of countries that are involved in its value. In essence, it averages out the performance of the constituent countries, with the impact of Greek failures being balanced by German strengths, and it is only by taking a view of their relative importance that an aggregated value can be obtained. Until recent economic difficulties, the euro was widely touted as a possible replacement for the US dollar as the reserve currency of the world, but this idea has faded for the time being.

The Swiss franc is not sufficiently widespread to be considered a major reserve currency, but is thought of as a safe haven when crises threaten the money of other countries and traders are looking for a place to park their resources.

Both of these currencies aim for price stability, but achieve that end in different ways. Switzerland maintains tight control over its relatively small economy, and because of the size can be easily influenced by outside factors. The Swiss National Bank has a mission to make sure that exports are competitive, and this drives its manipulations to keep the value of the Swiss franc down. The European Union has difficulty in achieving precise manipulation in this manner, but benefits from the size of the combined economies, which creates a massive inertia that is not easily shifted.

For both currencies, the usual influencing factors apply. The values are affected particularly by unemployment figures, balance of trade, interest rates, rates of inflation, and the general outlook for the economies. It is usually good advice to avoid taking a position on any currency when major announcements are expected, such as changes in interest rate or publication of economic factors. Unless you are experienced in anticipating and moving quickly with the market, it is easy to finish up on the wrong side of the trade.

Spread Betting on the EUR/CHF Rolling Daily

The foreign currency pair euro versus the Swiss franc is a popular spread betting trade, and you will find lots of activity in the markets. Because it is popular, the spread is a low value, two points with IG Index, and you will see the values changing rapidly during the normal trading hours. The current price is 12,091.8 – 12,093.8.

If you think that the euro is going to continue to weaken, you might want to take out a sell bet or short bet on this currency pair. As the first named currency, you place a sell bet for a weak euro and a buy or long bet if you think the euro will strengthen. The opposite applies to the Swiss franc, as it is named second. Assume you make a bet of £5 per point, selling the EUR/CHF.

If you are right, the spread quote might drop to 11,852.6 – 11,854.6, and you could close and take your profit. You work it out like this: –

  • You opened your bet at a price of 12,091.8
  • You closed your short bet at a price of 11,854.6
  • The number of points you have gained is 12,091.8-11,854.6
  • That is 237.2 points
  • With a bet of £5 per point, you will have won £1186

Some of the time, your bet will not work out and you will be faced with taking your loss. If the price rose up to 12,136.2 – 12,138.2, you might decide to close the bet and move on.

  • You opened your bet at a price of 12,091.8
  • You closed your bet at a price of 12,138.2
  • You have lost 12,138.2-12,091.8 points
  • A loss of 46.4 points
  • This amounts to a total loss of £232

As another example, perhaps you decided at the outset that the Swiss franc would be weakened by actions of the Swiss National Bank, trying to control the exchange rate and maintain exports. A weak franc is equivalent to a strong euro for this pairing, so you would go long, betting maybe £11 per point at 12,093.8. If you are right, you might close your bet when the price had risen to 12,283.1 – 12,285.1.

  • You opened your bet at a price of 12,093.8
  • You closed your long bet at a price of 12,283.1
  • Therefore you gained 12,283.1-12,093.8 points
  • That is 189.3 points
  • For your stake of £11 per point, you have won £2082.30

Once again, you must always consider that your bet may not win. If you have misjudged the situation, and the Swiss National Bank does not intervene, perhaps the spread bet quote would go down to 12,046.6 – 12,048.6, and you would close the bet to cut your losses.

  • You opened your bet at a price of 12,093.8
  • You closed your bet at a price of 12,046.6
  • Subtract 12,046.6 from 12,093.8
  • You have lost 47.2 points
  • At your chosen stake, this means you lost £519.20

Spread Betting on the EUR/CHF Future

The price you are quoted by your spread betting provider for a futures style bet reflects the market sentiment, that is where other traders think the price is headed. In this case, the quote for six months in the future on the EUR/CHF is 50 points less than the daily value, suggesting that the market thinks the euro will continue to weaken. The current price is 12,040.9 – 12,050.9.

If you decide to take a short position on the euro, the equivalent of a long position on the Swiss franc, you could sell for £13 per point at a price of 12,040.9. If the market sentiment is right as the weeks go by the daily spread quote may fall, and the quote on your futures bet may go down to 11,863.2 – 11,873.2, when you close the bet for a profit.

You opened the bet at 12,040.9 – as it was a short bet, it is placed at the lower value – and the bet closed at 11,873.2. The total number of points that the price dropped was 12,040.9 less 11,873.2, which works out to 167.7 points. You staked a total of £13 per point, so simple multiplication shows that you won £2180.10.

But the bet you placed was a futures style bet, and it may be that the price ran against you in the early days, so that you had to decide to close the bet and accept your losses before they became too large. Say the price went up to 12,086.3 – 12,088.3, and this was the level that you decided you needed to get out.

You opened the spreadbet at 12,040.9, and got out of it at 12,088.3, for a loss of 47.4 points. The bet was for £13 per point, which means you lost £616.20.

You might have taken a different view in the first place, and decided that Europe had got over its economic difficulties and the euro is going to strengthen against the Swiss franc. In this case, you could take a long position on the euro at a price of 12,050.9, staking perhaps £2 per point.

Say you were correct, and the spread bet quote went up to 12,216.8 – 12,218.8, at which point you decided to take your profit. Your bet was made at 12,050.9, and closed at 12,216.8, which gives you a total point gain of 165.9. If you multiply this by the stake, you can see that you won £331.80.

Once again, you must consider the case that the bet may not win. This will happen more often than you would like, but if you are disciplined in closing your losing spreadbet quickly, before the amount becomes too large, then you will find that you win overall anyway. In this case, you held a long bet but perhaps the quote drops to 11,993.8 – 11,995.8, and you decide to close your bet and accept the loss.

Your bet was made its 12,050.9, and closed at 11,993.8, for a loss of 57.1 points. At £2 per point, your total losses are £114.20.