The Swiss Franc is getting stronger against the Euro as worries about a potential trade conflict between the US and EU reduce investors’ appetite for risk. Right now, the EUR/CHF exchange rate is about 0.9265, close to a four-week low. This drop is happening because of US threats regarding tariffs related to Greenland, leading to fears of a larger trade conflict. Even though EUR/CHF is under pressure, the Euro gets some help from a strong ZEW Economic Sentiment survey. The data shows Eurozone sentiment rose to 40.8 in January, surpassing expectations, while Germany’s sentiment index increased to 59.6, indicating growing confidence despite trade worries.

Swiss Economics and Global Influence

In Switzerland, the December report on Producer and Import Prices showed a 0.2% decline for the month, which is opposite to what was expected, as well as a yearly drop of 1.8%. Investors are paying close attention to upcoming speeches by SNB Chairman Martin Schlegel and ECB officials at the World Economic Forum in Davos. The Swiss Franc is often seen as a safe-haven currency because of Switzerland’s stable economy, strong export sector, and political neutrality. The Swiss National Bank (SNB) meets every three months, aiming to keep inflation below 2%, which affects how the Franc is valued. Since Switzerland relies heavily on the Eurozone, its main trading partner, the movements of EUR and CHF are closely linked. Looking back to January 2025, we saw the EUR/CHF pair drop to around 0.9265 due to rising US-EU trade tensions. This led many to seek the safety of the Swiss Franc, even though Eurozone economic sentiment was surprisingly strong. The market was caught between geopolitical risks and positive data from Europe. As of January 20, 2026, the situation has changed, with the EUR/CHF pair trading much higher at about 0.9650. The intense trade fears from last year have diminished, and now the focus has shifted to the different strategies of the central banks. This shift in market drivers requires a new approach to trading the pair.

Market Outlook and Strategic Opportunities

The Swiss National Bank is being more aggressive than expected by raising its policy rate to 1.75% to address ongoing inflation, which is currently at 2.1% year-over-year. This is in contrast to the deflationary producer price data we saw in early 2025. A committed SNB provides solid support for the Franc. On the other hand, the Eurozone appears to be losing momentum. The latest ZEW Economic Sentiment survey came in at 25.5, a significant drop from the strong 40.8 reported last year. With the European Central Bank (ECB) hinting at a possible pause in its tightening measures, the Euro lacks a solid reason for strength. The difference between a hawkish SNB and a more cautious ECB suggests that volatility in EUR/CHF is expected to rise. For traders using derivatives, this environment makes long volatility strategies, like buying straddles, an attractive option. This approach would benefit from a significant movement in either direction, taking advantage of uncertainty without siding with a specific outcome. Alternatively, if you believe that the SNB’s firm stance will outweigh the ECB’s caution, buying put options can be a defined-risk way to position for a lower EUR/CHF. For example, purchasing puts with a strike price around 0.9500 could provide a favorable risk-reward profile. This strategy would protect against a sharp decrease in the pair driven by the widening policy gap. Create your live VT Markets account and start trading now.

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