The Chairman of the Swiss National Bank (SNB), Martin Schlegel, expects a small increase in inflation in the next few months. Current global growth is being affected by US tariffs. Interest rates are likely to stay the same for a while. Schlegel believes that the chance of going back to negative interest rates is quite low.

Stability in the Currency Pair

The USD/CHF currency pair has leveled off around 0.8100, a rate we haven’t seen in over two months. The SNB aims to keep prices stable in the medium and long term, which it defines as a rise in the Swiss Consumer Price Index of less than 2% per year. Interest rate changes depend on the SNB’s goal of price stability. If inflation predictions exceed this target, a rate hike could make the Swiss Franc more attractive due to better returns. To prevent the Swiss Franc from becoming too strong, the SNB intervenes in the foreign exchange market. This usually means buying foreign currencies to help Swiss exports stay competitive. The SNB Governing Council reviews monetary policy every quarter. They make decisions during meetings in March, June, September, and December, along with medium-term inflation forecasts.

Volatility and Derivative Trading Strategy

The Swiss National Bank signals that interest rates are likely to remain stable for a long time. While they expect inflation to rise in the coming quarters, a rate increase is not likely soon. With interest rates steady at 1.50% since September 2025, we shouldn’t anticipate sudden changes until their next decision in December. This stable interest rate environment suggests that volatility in the Swiss Franc may stay low. Recently, 3-month implied volatility on USD/CHF options fell below 5.5%, close to the lowest levels since before the 2022-2023 rate hikes. This indicates that trading may stay within a range of 0.8000 to 0.8250 in the near future. For derivative traders, this situation makes selling volatility an appealing strategy. With the SNB staying inactive, collecting premiums through short straddles or strangles on currency pairs like USD/CHF and EUR/CHF could be rewarding. These positions benefit from the passage of time and the expected lack of significant directional shifts. The main risk here is an unexpected rise in inflation that could force the SNB to change its approach. The latest CPI reading for October 2025 was a manageable 1.7%, but we should remember how quickly inflation rose in 2022. Any indication that inflation exceeds the 2% target could quickly undermine these short volatility positions. We also need to keep an eye on global growth, particularly with ongoing US tariff discussions. A significant slowdown, shown by weak manufacturing PMI data from Germany, could lead to a flight to safety. In the past, such events have rapidly strengthened the Swiss Franc, which might contradict the expectation of a stable range for USD/CHF. Create your live VT Markets account and start trading now.

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