The Swiss Government expects inflation to average 0.2% in 2025 and 2026, rising to 0.5% by 2027. GDP growth predictions are 1.4% in 2025, 1.1% in 2026, and 1.7% in 2027. The Swiss Franc (CHF) is unlikely to be greatly impacted by these figures. Currently, the USD/CHF is trading 0.06% higher at 0.7965. Switzerland is the ninth-largest economy in Europe by GDP and is known for its high living standards.

Switzerland’s Economic Structure

Switzerland’s economy is based on an open, free-market system, mainly focused on services, with the EU as its main trading partner. It has a strong export sector, excelling in watches, clocks, food, chemicals, and pharmaceuticals. Switzerland is also regarded as a tax haven due to its low tax rates. Even though the Swiss economy’s growth rate has slowed, its stability and high living standards still support the Swiss Franc. Commodity prices have limited effects on the CHF, but gold and oil prices do have some influence. The CHF’s safe-haven status ties it to gold, and as Switzerland imports fuel, oil prices can affect its value. With Swiss inflation expected to be just 0.2% and GDP growth dropping to 1.1% next year, there is little reason for the Swiss National Bank (SNB) to raise interest rates. This cautious stance is becoming more entrenched, especially since last month’s CPI was a mere 0.1% year-over-year. The SNB will likely keep its interest rate at 1.00% into 2026, creating a notable yield disadvantage for the franc. This stable policy environment should help keep currency volatility down, making it a good opportunity to consider selling options. With the European Central Bank and the U.S. Federal Reserve maintaining much higher rates, implied volatility on pairs like EUR/CHF and USD/CHF is expected to stay low. We see chances in selling strangles to earn premiums, betting that the franc will remain within a specific range against its major counterparts.

Interest Rate and Currency Volatility

The difference in interest rates strongly favors a weaker franc, especially against the U.S. dollar, where the Fed’s rate is above 3.5%. This makes long USD/CHF futures an appealing carry trade, allowing traders to benefit from the interest rate gap and potential price gains. Recent manufacturing data showed a slight contraction, indicating that the fundamentals for the Swiss economy do not support a strong franc. Nonetheless, we need to keep in mind the franc’s safe-haven status, which is its main strength. Any unexpected global financial crisis or geopolitical tension could quickly lead to a stronger CHF as investors seek safety. Buying inexpensive out-of-the-money puts on USD/CHF could be a smart hedge against such unforeseen events in the near future. This situation is reminiscent of the mid-2010s when the SNB actively tried to prevent the franc from becoming too strong, which could hurt its export-driven economy. With exports to the EU already showing signs of weakness in the third quarter of 2025, we expect the central bank will verbally act if the franc becomes too strong. This may create a soft ceiling for the franc’s value and supports our bearish outlook. Create your live VT Markets account and start trading now.

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