Sight deposits at the Swiss National Bank stood at CHF 468.5 billion for the week ending 12 September, a decrease from CHF 471.9 billion the week before. Domestic sight deposits saw a slight drop to CHF 441.7 billion, down from CHF 442.0 billion previously.

Recent Trends in Sight Deposits

This decrease in sight deposits is consistent with recent trends. New data on Swiss sight deposits indicates a small decline, suggesting that the Swiss National Bank (SNB) is maintaining a hands-off approach in the currency markets. Their lack of intervention indicates they are not actively opposing the franc’s current strength. This suggests that their policies will remain steady and predictable for now. We are looking forward to the SNB’s monetary policy decision next week, making this data especially important. The small drop in liquidity supports our belief that a surprise interest rate cut is very unlikely. Traders should prepare for the SNB to either keep rates steady or confirm a hawkish position. This view is supported by recent inflation reports. The August 2025 Swiss CPI indicated inflation at 2.1%, still above the central bank’s target of 2%. Given this ongoing inflation, the SNB has little reason to consider loosening its policy anytime soon.

Market Impact on Franc Volatility

For derivatives, this suggests that implied volatility on Swiss Franc options is likely to remain strong as we approach the SNB’s meeting. While the market is not expecting major changes, the potential for a hawkish surprise keeps volatility elevated. Selling short-dated franc volatility appears risky at this moment. Looking back, this trend is part of a long normalization process that started after the significant balance sheet expansions of the early 2020s. The gradual decline in sight deposits since 2024 indicates a commitment to reducing liquidity over time. This reduces the likelihood of a sudden, large-scale intervention to weaken the franc compared to previous years. Consequently, strategies focused on the EUR/CHF pair should concentrate more on the relative policies of the SNB and the ECB. With the European Central Bank also maintaining its stance but facing its own economic issues, there may be limited movement in the cross-rate until one of the banks signals a different direction. This suggests that range-trading strategies using options may be effective in the coming weeks. Create your live VT Markets account and start trading now.

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