The EUR/CHF exchange rate increased for a second day, driven by lower Swiss inflation affecting the Franc. In October, the Swiss Consumer Price Index (CPI) fell by 0.3% from the previous month and only rose by 0.1% compared to last year, raising concerns about disinflation. The Swiss National Bank (SNB) aims for inflation to stay between 0% and 2%. This recent data may lead the SNB to think about lowering interest rates, with the market predicting a 70% chance of a 25-basis-point cut to -0.25% within a year.

Swiss National Bank Rate Policy

The SNB’s policy rate was steady at 0.00% in September. However, officials hinted at possible rate changes if the economy declines. Switzerland’s SVME Purchasing Managers’ Index rose to 48.2 in October, while the Eurozone’s HCOB Manufacturing PMI returned to 50. Inflation measures how much prices for consumer goods and services are rising. Central banks typically aim for around 2%. When inflation is high, it can strengthen a currency because it may lead to higher interest rates that attract global investments. On the other hand, low inflation can weaken a currency. Inflation also affects gold prices; higher inflation makes gold less appealing compared to interest-earning assets. The weak Swiss inflation numbers from October 2025 are currently our main focus. With inflation year-on-year at just 0.1%, the SNB feels pressure to address disinflation, suggesting that the Swiss Franc could weaken. We observe a clear difference in policy direction between the SNB and the European Central Bank (ECB). While SNB officials are considering returning to negative rates, the ECB is focused on persistent wage growth and is not rushing to ease monetary policy. This mismatch is likely to support a continued rise in the EUR/CHF exchange rate, currently around 0.9300.

Strategies for Profiting from EUR/CHF

In the coming weeks, we are considering strategies that benefit from a rising EUR/CHF. Buying call options with strike prices near 0.9500 for the first quarter of 2026 is a way to capitalize on potential gains with defined risk. The market now sees a high chance of an SNB rate cut within a year, which should add to this upward trend. Looking back, we recall the SNB’s significant policy changes, particularly the 2015 de-pegging, showing their readiness to act decisively. During the last phase of negative interest rates in Switzerland, EUR/CHF consistently traded well above parity. While we do not expect an overnight return to 1.10, history indicates that when the SNB begins an easing cycle, the Franc can weaken considerably. Given this outlook, we are also thinking about selling out-of-the-money EUR/CHF puts to generate premium income, as we believe the SNB’s dovish approach will support the currency pair. Last week’s Swiss unemployment data, which showed a slight increase to 2.3%, adds to domestic economic worries and strengthens the case for SNB action. This makes short-term declines in EUR/CHF seem less likely. Create your live VT Markets account and start trading now.

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