In July, Switzerland saw a 0.2% decrease in producer and import prices, according to the Federal Statistics Office on 14 August 2025. Producer prices fell by 0.3%, but this was somewhat offset by a 0.1% rise in import prices. Overall, prices for producer and import goods dropped 0.9% compared to July of last year, mainly due to a decline in import prices. While producer prices stayed the same year-on-year, import prices decreased by 2.8%.

Disinflationary Trend

The decline in producer and import prices confirms a disinflationary trend we have been tracking throughout 2025. The year-on-year drop of 0.9% strengthens the view that the Swiss National Bank (SNB) will keep a cautious approach. The upcoming SNB meeting in September is crucial, as pressure is growing for action against low inflation. Weak producer prices are a strong indicator of future consumer prices, which showed a modest increase of 1.1% in July 2025. With inflation stubbornly below the central bank’s 2% target, the chance of a rate cut later this year seems more plausible. Currently, the derivative markets anticipate a very low probability of any rate hikes for the near future. Import prices’ annual decline of 2.8% is mainly due to the strong franc. The EUR/CHF exchange rate has been around 0.95 for the last quarter, making imported goods cheaper and keeping inflation low. This situation increases the likelihood that the SNB will take steps to weaken the currency, either verbally or directly.

Market Opportunities

With this in mind, we see potential in positioning for a weaker franc in the options market. Buying call options on EUR/CHF or USD/CHF is a way to profit from any SNB actions that may weaken the franc, while keeping risk defined. The implied volatility in these pairs has been relatively low, allowing for reasonable entry costs before the September meeting. Traders should also consider interest rate derivatives connected to the Swiss Average Rate Overnight (SARON). Ongoing deflationary signals suggest that Swiss rates will remain steady or possibly decrease. Using SARON futures to reflect this “lower for longer” rate environment could be a wise strategy in the coming months. This situation is reminiscent of the years leading up to 2015, when the SNB tackled a strong franc and deflation. While the global context has changed, it serves as a reminder that the central bank is willing to take decisive actions to fulfill its objectives. Therefore, holding positions that benefit from a weaker franc appears to be a logical reaction to the latest data. Create your live VT Markets account and start trading now.

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