Switzerland’s Consumer Price Index (CPI) for August increased by 0.2% compared to last year, matching expectations. The previous month also recorded a 0.2% rise. The core CPI rose by 0.7% year-on-year, a slight decrease from July’s 0.8%. This small change in core inflation does not affect the Swiss National Bank’s current outlook.

Low Price Pressures in Switzerland

Today’s inflation data confirms that price pressures in Switzerland remain low. The core inflation rate dipped to +0.7%, suggesting there is no immediate inflation concern. This stability supports the Swiss National Bank’s (SNB) current position. The SNB has cut its policy rate twice this year, reducing it to 0.75% in June 2025. Given this inflation report, market expectations indicate about a 60% chance of another 25 basis point cut at the next meeting on September 18th. Thus, there’s little reason to doubt the central bank’s easing approach. For derivatives, this predictability suggests limited implied volatility in the Swiss franc. The three-month implied volatility on EURCHF is currently near yearly lows of 5.5%. This report supports strategies such as selling options to earn premium. We see this as a good opportunity for selling strangles, as a large price breakout seems unlikely.

Interest Rate Differential

The interest rate gap between Switzerland and other major economies, like the United States where rates exceed 4%, continues to put pressure on the franc. Therefore, we should consider positions that benefit from a weaker franc, such as purchasing call options on USDCHF or EURCHF. The gradual policy divergence from the SNB in early 2024 marked the beginning of this ongoing franc weakness. Today’s situation is similar to the years after the 2015 de-pegging when a consistently dovish SNB led to long periods of low franc volatility. With the central bank’s clear direction, sharp and unexpected currency swings are less likely. This historical insight boosts our confidence in maintaining short volatility and short-franc positions. Create your live VT Markets account and start trading now.

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