The recent minutes from the Swiss National Bank (SNB) indicate that interest rates are unlikely to fall into negative territory. Inflation in Switzerland is not expected to remain persistently low, and the effects of US tariffs on the Swiss economy are anticipated to be minimal.

The Governing Board’s View

The governing board thinks the current monetary policy is suitable and should remain in place. US tariffs impact a part of the economy, possibly slowing global trade and affecting the purchasing power of families in the US. Signs of a slowing labor market in the US have led to expectations of easier monetary policy there. During the third quarter of 2025, the financial market saw low volatility. Major risks include US tariffs and global demand changes, along with fluctuations in exchange rates that could affect inflation predictions. After the release of the SNB minutes, the USD/CHF pair saw slight buying interest, rising by 0.21% to nearly 0.7980 in Thursday’s session. The Swiss National Bank (SNB) is Switzerland’s central bank dedicated to maintaining price stability. This involves changing policy rates, which influence the value of the Swiss Franc. The SNB also intervenes in the foreign exchange market to manage the strength of the Swiss Franc. Monetary policy decisions are made every three months, during which inflation forecasts are also revised. The SNB has indicated it will keep interest rates steady, as fears of long-lasting negative inflation have eased. This gives a solid base for the Swiss franc in the near future. This stance clearly contrasts with the US, where markets are anticipating possible rate cuts by the Federal Reserve due to signs of a slowing labor market. This position is credible since Swiss inflation has stayed manageable, running at 1.4% year-over-year in the second quarter of 2025, well within the SNB’s comfort zone. In contrast, the latest US Non-Farm Payrolls report from September showed slowed job growth, increasing expectations for Fed easing before the end of the year. This difference in policy signals traders to expect the franc to strengthen against the dollar.

Market Opportunities and Risks

With financial markets experiencing low volatility in the third quarter, as mentioned in the minutes, option premiums on currency pairs like USD/CHF are probably low. This creates an opportunity to buy put options on USD/CHF at a fair price. Such a strategy would be profitable if the pair drops below the strike price, aligning with our expectation of franc appreciation. We should also recall the SNB’s actions during the high inflation of 2022 and 2023, when they let the franc strengthen to reduce import costs. Their current comfort level indicates they won’t weaken the currency, which removes a significant risk for those betting on a stronger franc. The slight increase in USD/CHF to 0.7980 after the minutes might be a short-term reaction, providing a better entry point for long-franc positions. However, the SNB points to global trade tensions from US tariffs as a major risk, which could cause sudden market shocks. The Cboe Volatility Index (VIX) has remained below 15 for most of the third quarter, indicating market calmness. Given this situation, buying a straddle on EUR/CHF could be a wise hedge, as it would benefit from significant price changes in either direction. Create your live VT Markets account and start trading now.

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