The EUR\/CHF pair declined for a third consecutive day as the Swiss Franc gained strength after the Swiss National Bank’s (SNB) decision to maintain the policy rate at 0%. This decision aligns with forecasts and reflects the SNB\u2019s cautious yet stable approach. Focus now shifts to the European Central Bank (ECB) meeting next week, with expectations for rates to remain unchanged.<\/p>\n
The SNB\u2019s decision not to change its policy rate coincides with minimal inflationary pressure compared to previous evaluations. Inflation decreased to 0.0% in November from 0.2% in August, with stable medium-term forecasts. The SNB projects inflation to average 0.2% in 2025, 0.3% in 2026, and 0.6% in 2027, assuming unchanged rates.<\/p>\n
Switzerland’s economy has contracted in the third quarter, yet the outlook shows modest improvement driven by marginally better global conditions. The Gross Domestic Product (GDP) is anticipated to grow by just under 1.5% in 2025 and about 1% in 2026. While the possibility of negative rates remains, SNB\u2019s Chairman Martin Schlegel noted the likelihood of their return has not increased, signalling a higher threshold for such measures.<\/p>\n
Looking forward, market eyes are on the ECB’s upcoming interest rate decision. The ECB is likely to maintain current key policy rates, although hints of a rate hike next year have surfaced, stemming from recent policymakers’ remarks.<\/p>\n
With the Swiss National Bank holding its policy rate at 0%, the franc’s strength is driving EUR\/CHF down towards the 0.9300 level. We see this as a reaction to the SNB’s steady hand, where no news is interpreted as good news for the stable franc. Traders should see this as a continuation of the trend that has been in place for the last three days.<\/p>\n
The key divergence for us to watch is between the SNB and the European Central Bank. The latest Eurostat flash estimate for November 2025 showed headline inflation in the Eurozone ticking up to 2.8%, which fuels the speculation that the ECB may be forced to act in 2026. This contrasts sharply with Swiss inflation, which was reported at 0.0%, giving the SNB no reason to consider a rate hike.<\/p>\n
This growing policy gap suggests positioning for further downside in the pair, possibly through buying put options on EUR\/CHF to profit from a continued slide. The SNB has forecast Swiss inflation to remain below 1% all the way through 2027, locking in this policy difference for the foreseeable future. The path of least resistance for EUR\/CHF appears to be lower in the coming weeks.<\/p>\n
However, we must remain cautious about the SNB\u2019s willingness to intervene in currency markets to weaken the franc if it strengthens too quickly. Data released last week showed the SNB’s foreign currency reserves stood at a substantial CHF 715 billion, giving it significant firepower to act. This threat of intervention could place a floor under the EUR\/CHF pair if the decline becomes too rapid.<\/p>\n
We remember the market chaos in January 2015 when the SNB abruptly removed its peg, which shows how sudden policy shifts can cause extreme volatility. While the SNB says the hurdle for intervention is high, its history suggests we should not become complacent. This memory should keep traders from making excessively large one-way bets against the franc.<\/p>\n
Given the uncertainty ahead of next week’s ECB meeting and the constant threat of SNB action, trading implied volatility could be a prudent strategy. Looking at the options market, one-month implied volatility for EUR\/CHF has already risen to 6.5% from 4.8% last quarter. Using options strategies that benefit from price swings, regardless of the direction, may be a wise approach through the end of the year.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/CHF falls as SNB holds rates; attention turns to ECB decision amid stable inflation and modest growth.<\/p>\n","protected":false},"author":62,"featured_media":17021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36636","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/36636","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=36636"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/36636\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/17021"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=36636"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=36636"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=36636"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}