The Swiss National Bank (SNB) has determined there is no need for changes to monetary policy, as inflation is not expected to decrease further. Interest rates will remain low to maintain price stability within the target range of 0-2%. The SNB does not consider the valuation of the Swiss Franc essential but focuses on how changes in its exchange rate may affect inflation.

As of the latest update, the USD/CHF pair trades slightly lower, close to 0.8075, after hitting a two-month high of approximately 0.8100 earlier. The Swiss National Bank remains open to foreign exchange interventions to manage the Franc’s appreciation, which can impact the export sector’s competitiveness.

Swiss National Bank’s Responsibilities

The SNB is responsible for ensuring price stability over the medium to long term, helping manage monetary conditions through interest rates and exchange rates. The SNB’s policy rate aims to keep inflation at a Consumer Price Index (CPI) rise of below 2% per year. Policy assessments occur quarterly, potentially influencing monetary policy decisions based on medium-term inflation forecasts.

The Swiss National Bank is telling us they are comfortable with the current situation and have no plans to adjust interest rates. With their inflation forecast at a low 0.4% for the end of the year, the main takeaway is policy stability. This removes a key source of uncertainty for the Swiss Franc leading into the next policy meeting in December.

This stance is reinforced by the latest economic data, as we saw Swiss inflation for October hold steady at 0.5% year-over-year. This confirms the bank’s view that prices are no longer falling, making a surprise rate cut highly unlikely in the coming weeks. We should therefore anticipate the SNB will remain on the sidelines for the rest of the year.

For derivatives traders, this signals that implied volatility in Swiss Franc currency pairs may be overpriced. With the SNB on a predictable path, options strategies that profit from range-bound price action, such as selling strangles on EUR/CHF, could be attractive. This is particularly true for shorter-term options that expire before the December policy meeting.

Policy Divergence With The European Central Bank

We see a clear policy divergence emerging with the European Central Bank, which is facing a weaker economic outlook and is signaling potential rate cuts in early 2026. This contrast makes long Swiss Franc positions against the Euro a compelling trade. Using derivatives like buying EUR/CHF put options can offer a way to capitalize on this expected weakness in the Euro.

However, we must remember the SNB’s warning that FX interventions are still possible. Looking back at 2023 and 2024, we saw the SNB aggressively intervene to strengthen the Franc; they could just as easily intervene to weaken it if it appreciates too quickly and threatens to push inflation even lower. This puts a potential cap on the Franc’s strength and makes it prudent to use options to define risk on any long positions.

Against the US Dollar, the trade is less clear as the Federal Reserve is also expected to hold rates steady through the end of 2025. The USD/CHF pair hit a two-month high near 0.8100 before pulling back, suggesting that while the SNB’s stance is supportive of the Franc, major moves will depend on shifts in US economic data. This makes cross-currency plays like the one against the Euro more straightforward for now.

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