The Euro (EUR) is steady against the Swiss Franc (CHF) as traders assess Eurozone data. Right now, EUR/CHF is about 0.9289, reversing a two-day decline. The HCOB Composite PMI for the Eurozone fell to 51.5 in December from 51.9. The services PMI also eased to 52.4. In Germany, the Composite PMI dipped slightly to 51.3, but the Services PMI improved to 52.7.

Spain Services PMI Rises

Spain’s services sector is stronger, with the PMI rising to 57.1 in December from 55.6. In contrast, Italy’s Services PMI fell to 51.5 from 55, while France’s Composite PMI dropped to 50.0. We are expecting German inflation data and initial Eurozone inflation figures. These could influence the European Central Bank’s policy choices. Economists expect the Eurozone Core HICP to stay at 2.4% year-over-year, while the headline HICP may decrease to 2.0%. In Switzerland, the SVME PMI dropped to 45.8, showing ongoing contraction in manufacturing. Inflation data is awaited, with predictions of a 0.1% decrease in monthly CPI and a slight annual inflation increase to 0.1%. Ongoing low inflation might pressure the Swiss National Bank to rethink negative interest rates.

Policy Divergence Between Banks

With mixed economic signals at the end of 2025, attention is on the policy divergence between the European Central Bank (ECB) and the Swiss National Bank (SNB). The slowdown in Eurozone private-sector activity is concerning, but the sharp contraction in Swiss manufacturing to 45.8 in December is even more alarming. This could lead to weakness in the Swiss Franc compared to the Euro. The latest inflation data released last week supports this view. Eurozone headline inflation for December 2025 remained close to the ECB’s 2% target, giving policymakers little reason to think about rate cuts soon. On the other hand, Switzerland’s CPI figures showed just a 0.1% year-over-year rate, reflecting ongoing disinflationary pressures and increasing the chances of the SNB taking action. For derivative traders, this outlook suggests preparing for a higher EUR/CHF exchange rate in the coming weeks. Buying call options on EUR/CHF is one way to profit from a possible upward shift while limiting risk if market sentiment suddenly changes. These strategies are especially relevant before the next SNB policy meeting, as expectations for a rate cut are growing. Looking back, this trend has been evident throughout the second half of 2025, as Swiss economic data continually lagged. Historical data from 2023-2024 shows that during periods of notable policy divergence, EUR/CHF has followed clear trends. Implied volatility in one-month options has already increased from 4.5% to 5.2% since the start of the new year, indicating the market is preparing for a possible breakout from its recent range. Create your live VT Markets account and start trading now.

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