The Euro has weakened against the Swiss Franc for four consecutive days, reaching its lowest level since May 5. The EUR/CHF pair is currently near 0.9280, down almost 0.60% this week, as the Franc strengthens on safe-haven demand amidst trade tensions and approaching US tariff deadlines.
US President Donald Trump extended a tariff deadline with Mexico by 90 days, maintaining existing tariffs while warning of new tariffs on countries lacking a comprehensive deal from August 1. Despite a trade deal phone discussion with Mexico’s President Claudia Sheinbaum, uncertainty remains, increasing trade-related anxiety globally.
Switzerland’s retail sales rose 3.8% year-on-year in June, greatly exceeding expectations and strengthening the Franc further. Monthly sales showed a recovery with a 1.5% climb, reversing a previous decline, contributing to the currency’s appeal as a safe haven.
The Eurozone’s second-quarter GDP edged up only 0.1%, reflecting a significant slowdown. Market focus shifts towards the Eurozone’s July inflation data release, crucial for forecasting the European Central Bank’s next steps amidst persistent low price pressures and weak growth. The Core Harmonized Index of Consumer Prices, excluding volatile factors, will be key in measuring inflation trends and determining the Euro’s future strength.
Given the Euro’s weakness against the Swiss Franc, we see a clear trend that is likely to extend into the coming weeks. The EUR/CHF pair is being pressured by both a fundamentally strong Franc and a struggling Euro. This divergence presents a clear opportunity for bearish strategies on the currency pair.
The Franc’s appeal is twofold, driven by both global uncertainty and domestic strength. The ongoing trade anxieties, especially with the US tariff deadline hitting today, August 1st, enhance the Franc’s safe-haven status. This is compounded by the Swiss National Bank’s decision back in June 2025 to raise its policy rate to 1.75%, which contrasts sharply with the Eurozone’s outlook.
On the other side, the Euro is weighed down by the zone’s stagnant Q2 GDP growth of just 0.1%. We are now waiting for the July inflation report, where consensus forecasts from a recent Bloomberg survey expect core inflation to print at 1.9%, remaining below the European Central Bank’s target. This weak data will likely keep the ECB in a dovish stance, preventing any support for the Euro.
For the coming weeks, we believe traders should consider buying put options on the EUR/CHF pair. Opting for contracts with expirations in late August or September 2025 would provide enough time for the market to price in the Eurozone’s inflation data and any further ECB guidance. This strategy allows for profiting from a continued decline in the pair’s value.
It is important to note that implied volatility for EUR/CHF has ticked up to around 6.8%, signaling that the market is already pricing in larger-than-usual price swings. This reminds us of the market dynamics seen in the early 2010s, when economic stress in the Eurozone led to a prolonged flight to the safety of the Swiss Franc. We are positioned for a similar, though perhaps less dramatic, trend to unfold.
