Switzerland’s August manufacturing Purchasing Managers’ Index (PMI) reached 49.0, beating expectations of 46.9. This is a small rise from last month’s score of 48.8. While this indicates a slight increase in business activity, the manufacturing sector remains below the 50.0 mark, showing contraction for the 32nd month in a row. Despite tariffs and other issues, business confidence seems mostly unchanged.

August PMI Gains in Production

The higher PMI in August was supported by improved production, which climbed to 55.4, up by 5.8 points. New orders also saw a minor increase, reaching 45.2, a rise of 1.3 points. On the downside, employment conditions worsened, dropping to 46.4, down by 2.4 points. This suggests ongoing challenges in the labor market for the sector. Although the August 2025 PMI score is better than expected, it is more of a slight positive than a significant turnaround. The fact that the sector has been contracting for 32 straight months reveals ongoing weaknesses in the Swiss economy. Thus, any early strength in the Swiss Franc (CHF) after this report should be approached cautiously. This persistent economic weakness, especially the decline in employment, will likely keep the Swiss National Bank (SNB) adopting a cautious approach. Remember, the SNB has already reduced its policy rate twice in 2025, in March and June, lowering it to 1.00% because of slowing global demand. This PMI report strengthens the market expectation that no rate hikes are likely for the rest of the year, a sentiment reflected in interest rate futures.

Opportunities for Relative Value Trades

For equity markets, the mixed data creates chances for relative value trades. While the rise in production is a plus for industrial parts of the Swiss Market Index (SMI), the ongoing overall contraction is a challenge for the wider market. We might consider call options on specific industrial exporters while using index puts on the SMI to protect against broader economic issues. Given the conflicting internal data and external risks, such as tariffs mentioned in this report, uncertainty is expected to increase. The Eurozone, Switzerland’s largest trading partner, saw its manufacturing PMI drop to 48.5 last week, revealing that regional weakness continues. In this context, buying volatility through options, such as straddles on the EUR/CHF currency pair, could be a wise strategy to prepare for a potential sharp movement in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now