Commerzbank uses a structural exchange rate pass-through model based on invoicing currencies to assess how the Swiss National Bank’s tolerance for a weaker Swiss franc feeds into Swiss inflation and EUR/CHF. The framework finds that euro-denominated trade drives short-term pass-through: after one month, the modelled euro channel is about 3.8 times stronger than the US dollar channel, and the gap remains material under robustness checks.
On the model’s estimates, franc depreciation adds 0.18 percentage points to inflation after 12 months, while the franc’s strength in 2022 cut inflation by roughly 0.22 percentage points over the same horizon. Compared with that earlier episode, the implied swing is larger: if the SNB had responded this year as it did four years ago, the overall price increase would have been 0.4 percentage points lower. With imported inflation pressure described as moderate, the analysis points to a persistent euro area–Switzerland interest rate differential and a supportive backdrop for EUR/CHF over the medium term, with options positioned as a way to gain exposure without spot financing costs.
Swiss Franc Policy, Inflation, and Interest Rate Divergence
We are currently observing a deliberate shift by the Swiss National Bank (SNB) to tolerate a weaker Swiss Franc, especially as Swiss inflation hovered at a manageable 1.3% in mid-2026. Because the SNB kept its key policy rate steady at 1.00% during its recent June meeting while the European Central Bank maintained a much higher policy rate, the interest rate gap remains wide. This policy divergence makes holding short CHF positions highly attractive as we head into August.
Trade Dynamics, Pass-Through, and Strategy Recommendations
Our analysis of trade dynamics shows that Swiss import prices are heavily driven by Euro-denominated invoicing, making the Euro channel nearly four times stronger than the US Dollar channel in the short term. Fortunately, the inflationary impact of the Franc’s recent depreciation is limited to a mild 0.18 percentage points over a twelve-month period. This moderate pass-through means the SNB is under no pressure to intervene, allowing the EUR/CHF pair to steadily climb.
To capitalize on this trend in the coming weeks, we recommend derivative traders utilize the options market rather than spot trading. Buying EUR/CHF call options allows us to capture the upward momentum of the currency pair while avoiding the high financing costs associated with the interest rate differential. Current low implied volatility in G10 currency markets provides an exceptionally cheap entry point for this bullish strategy.
