The Swiss National Bank (SNB) Chairman, Martin Schlegel, announced that planned US tariffs on pharmaceutical products could elevate economic risks. He added that inflation is anticipated to rise slightly in the coming quarters, and the SNB will monitor and adjust monetary policy as needed.

The USD/CHF currency pair has remained stable, situated around 0.7960 throughout the day. Economic uncertainties persist, and the SNB remains vigilant in observing these developments.

Role of the Swiss National Bank

The Swiss National Bank, Switzerland’s central bank, ensures price stability, targeting a Consumer Price Index (CPI) increase of less than 2% annually. It adjusts interest rates based on its price stability objective, with higher rates strengthening the Swiss Franc due to increased yields.

The SNB intervenes in the foreign exchange market to maintain CHF competitiveness, especially against the Euro. With extensive foreign exchange reserves, it buys foreign currencies to manage CHF valuation. However, during high inflation periods, the SNB avoids interventions to keep energy imports affordable.

The SNB’s Governing Council holds monetary policy assessments quarterly, in March, June, September, and December. Each meeting concludes with a policy decision and a medium-term inflation forecast.

Given the Swiss National Bank’s warning on October 22, 2025, about US pharmaceutical tariffs, the main takeaway is heightened economic uncertainty. The USD/CHF pair is currently stable around 0.7960, but this stability masks a growing risk to the Swiss economy. The SNB has clearly signaled it will act if necessary, putting its policy rate and currency interventions on the table.

Impact of US Tariffs on Swiss Economy

We see that the concern over US tariffs is significant, as pharmaceutical products have consistently made up over 45% of Switzerland’s total exports in recent years. With the latest Swiss inflation data from September 2025 showing a rise to 1.8%, the SNB is caught between managing a potential economic slowdown and keeping prices under its 2% target. This policy conflict creates a prime environment for derivative strategies.

The current stability in the USD/CHF suggests implied volatility is likely suppressed. We believe this presents an opportunity to purchase volatility through instruments like straddles or strangles. Such a strategy would profit from a sharp price swing in either direction, which could be triggered by any definitive news on the US tariff front in the coming weeks.

For those with a directional view, buying call options on USD/CHF could be a prudent move to capitalize on a potential weakening of the Swiss franc if tariffs are confirmed. Conversely, traders who believe the tariff threat will fade could consider put options, betting on the franc strengthening as economic fears ease. Options provide a defined-risk way to position for these binary outcomes.

We must also remember the SNB’s history of direct currency market intervention, most notably the major actions taken to weaken the franc in the early 2010s to protect exporters. While the bank has been hands-off more recently, a severe economic shock from tariffs could force it to intervene again. This potential for sudden and decisive central bank action underscores the value of using options to manage risk.

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