The Swiss franc is likely to stay stable even if the Swiss National Bank (SNB) cuts interest rates into negative territory. It remains a top choice for safe-haven investments worldwide, suggesting that negative rates alone may not weaken it during times of uncertainty.

Conditions for SNB Policy Change

The SNB would probably change its policy only in serious situations, like a major decline in the global or European economy. Another possible reason for the SNB to act could be a significant reduction in the interest rate gap with the European Central Bank, which might support the franc’s value. At the same time, the franc’s status as a safe haven is expected to cushion it from any downward pressure caused by rate changes. As we evaluate the markets on August 27, 2025, we believe that derivative traders should rethink any short positions on the Swiss franc. Right now, the franc’s status as a safe haven outweighs worries about possible rate cuts from the SNB. This is particularly true given that recent German IFO business climate data for August dropped to a worrying 85.2, raising concerns about a slowdown in Europe. We are now focusing on strategies that will benefit from a stronger franc, especially against the euro, which is facing challenges. As the EUR/CHF exchange rate tests the 0.9500 level, buying put options on EUR/CHF provides a way to manage risk while positioning for a possible downturn. This strategy allows traders to take advantage of potential problems in the European economy without direct exposure to broader market fluctuations. We remember the market shock in January 2015 when the SNB removed the franc’s peg. This serves as a strong reminder of the currency’s underlying strength when intervention is absent. This history suggests that any weakened franc resulting from SNB action could be short-lived. Thus, we believe the likely direction for the franc is upward during times of global uncertainty.

Opportunity in Volatility

The implied volatility in franc options may not fully account for the risk of a significant economic shock, especially with Swiss inflation at only 0.8% last month. This presents an opportunity to buy longer-dated call options on the franc, or puts on EUR/CHF and USD/CHF, at lower premiums. Such positions could yield substantial rewards if current anxieties escalate into a larger flight to safety in the weeks ahead. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now