OCBC said recent equity market turbulence has coincided with further Swiss franc gains, with EUR/CHF consolidating well below 0.92. It said ongoing CHF strength could increase the risk that inflation comes in below Swiss National Bank forecasts.
It noted that last week’s Swiss CPI matched the 0.1% year-on-year projection for 1Q26. It added that further CHF gains could still lead to downside surprises versus those inflation forecasts.
Snb Tolerance For A Stronger Franc
OCBC said sustained currency appreciation could test the SNB’s current tolerance for a stronger franc. It also said the threshold for a return to negative interest rates remains high.
The report referred to recent Riksbank minutes that flagged Swedish krona strength as a downside risk to inflation. It said a similar pattern in Switzerland could lead the SNB to adopt a softer policy stance if CHF strength persists.
Recent turbulence in equity markets, which we have seen push the VIX volatility index up over 20% in the last month, is creating safe-haven flows into the Swiss Franc. This pressure has caused the EUR/CHF pair to sink below the 0.9200 mark, a stark contrast to the 0.95-0.97 range we observed for much of 2025. This sustained currency strength is becoming a significant issue for Swiss policymakers.
The strong franc is a direct threat to the Swiss National Bank’s inflation goals, as it makes imports cheaper and weighs on domestic prices. With the latest inflation data for January 2026 already showing a very low 0.1% year-over-year increase, the SNB has little room for error before prices start to fall. This figure is right at the bottom edge of the central bank’s 0-2% target range, making any further appreciation of the franc a serious concern.
March 19 2026 SnB Meeting
We believe this situation makes it more likely the SNB will signal a softer policy stance, much like Sweden’s Riksbank recently did regarding the krona. For derivative traders, this means positioning for a potential rebound in EUR/CHF could be profitable, as any hint of a policy shift from the SNB could cause a sharp upward move. This could be structured by purchasing EUR/CHF call options that expire after the next SNB meeting.
The key date to watch is the upcoming SNB monetary policy assessment on March 19, 2026. Any verbal intervention or unexpectedly dovish comments from officials beforehand could be a catalyst for the franc to weaken. Traders should monitor option volatility, as an increase could signal that the market is beginning to price in a higher probability of a policy change.
