The Swiss National Bank (SNB) has decided not to change its monetary policy. They believe inflation will not drop further, so interest rates will stay low, aiming for price stability within a range of 0-2%. The SNB mainly focuses on how the Swiss Franc’s exchange rate affects inflation rather than its current valuation. Currently, the USD/CHF pair is trading slightly lower at about 0.8075, after reaching a two-month high near 0.8100. The SNB is open to foreign exchange interventions to control the Franc’s rise, which can influence the competitiveness of exports.

Swiss National Bank’s Responsibilities

The SNB aims to maintain price stability in the medium to long term. They manage monetary conditions through interest and exchange rates, targeting an inflation rate below 2% annually. The SNB reviews its policies every quarter, which may affect future monetary decisions based on inflation forecasts. The Swiss National Bank is satisfied with the current economic situation and does not plan to change interest rates. Their inflation forecast stands at just 0.4% for the year-end, indicating policy stability. This clarity eliminates uncertainty for the Swiss Franc ahead of the December policy meeting. Recent economic data supports this stance, with Swiss inflation for October remaining steady at 0.5% year-over-year. This suggests prices are not falling, making unexpected rate cuts unlikely in the near future. Thus, it’s expected that the SNB will stay uninvolved for the rest of the year. For derivatives traders, this indicates that implied volatility in Swiss Franc currency pairs may be overvalued. Given the SNB’s predictable path, strategies like selling strangles on EUR/CHF could be attractive, especially for shorter-term options before the December meeting.

Policy Divergence With The European Central Bank

We are noticing a clear divide in policy between the SNB and the European Central Bank (ECB), which faces a weaker economic outlook and may cut rates in early 2026. This difference makes long Swiss Franc positions against the Euro an appealing trade. Derivatives such as buying EUR/CHF put options can help investors take advantage of the expected Euro weakness. However, we must remember the SNB’s caution that currency interventions are still possible. Throughout 2023 and 2024, the SNB vigorously intervened to strengthen the Franc; similarly, they might weaken it if its value rises too quickly and risks lowering inflation. This could limit the Franc’s strength, underscoring the need for options to manage risk on long positions. In contrast, trading against the US Dollar is less predictable, as the Federal Reserve is also expected to keep rates steady until the end of 2025. The USD/CHF pair reached a two-month high near 0.8100 before decreasing, indicating that while the SNB supports the Franc, significant changes will rely on US economic data. This makes cross-currency trades like those against the Euro more straightforward for now. Create your live VT Markets account and start trading now.

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