The Euro (EUR) steadies against the Swiss Franc (CHF) as traders evaluate Eurozone data. Currently, EUR/CHF is around 0.9289, reversing a two-day decline.
The HCOB Composite PMI for the Eurozone decreased to 51.5 in December from 51.9, with services PMI easing to 52.4. Germany’s Composite PMI fell slightly to 51.3, but its Services PMI improved to 52.7.
Spain Services PMI Rises
Spain’s services sector gained strength, with the PMI rising to 57.1 in December from 55.6. Conversely, Italy’s Services PMI dropped to 51.5 from 55, while France’s Composite PMI slipped to 50.0.
German inflation data is anticipated, alongside preliminary Eurozone inflation figures, potentially affecting the European Central Bank’s policy decisions. Economists foresee Eurozone Core HICP steady at 2.4% YoY and headline HICP declining to 2.0%.
In Switzerland, the SVME PMI fell to 45.8, indicating continued contraction in manufacturing. Swiss inflation data is awaited, with expectations of a 0.1% MoM CPI decrease and a slight annual inflation rise to 0.1%.
Persistent low inflation could pressure the Swiss National Bank to reconsider negative interest rates.
Policy Divergence Between Banks
Given the mixed economic signals we saw at the end of 2025, the key focus remains on the policy divergence between the European Central Bank and the Swiss National Bank. The slowdown in Eurozone private-sector activity is a concern, but the Swiss manufacturing sector’s sharp contraction to 45.8 in December is significantly more worrying. This sets up a dynamic where the Swiss Franc could be poised for weakness against the Euro.
The latest inflation data, released just last week, has solidified this view. As anticipated, Eurozone headline inflation for December 2025 held steady near the ECB’s 2% target, giving policymakers little reason to consider rate cuts in the near term. In contrast, Switzerland’s CPI figures showed a year-over-year rate of just 0.1%, highlighting persistent disinflationary pressures that increase the likelihood of the SNB taking action.
For derivative traders, this outlook suggests positioning for a higher EUR/CHF exchange rate in the coming weeks. Buying call options on EUR/CHF offers a way to profit from a potential upward move while limiting downside risk if sentiment unexpectedly shifts. These strategies seem particularly relevant ahead of the next SNB policy meeting, as market expectations for a rate cut are now building.
Looking back, we saw this trend develop throughout the second half of 2025 as Swiss economic data consistently underperformed. Historical data from 2023-2024 shows that during periods of significant policy divergence, EUR/CHF has sustained clear trends. Implied volatility in one-month options has already ticked up from 4.5% to 5.2% since the new year began, indicating the market is preparing for a potential breakout from its recent range.
