The Swiss National Bank (SNB) reported that total sight deposits as of 1 August were CHF 468.5 billion, down from CHF 474.7 billion the previous week.
Domestic sight deposits decreased to CHF 439.5 billion, compared to CHF 444.9 billion previously.
July Increase Analysis
The decline follows a period of increase during most of July. Specific causes for the increase in July were previously noted.
The latest data shows Swiss sight deposits fell by about CHF 6.2 billion in the week ending August 1, 2025. This change suggests the Swiss National Bank (SNB) may be stepping back from its recent market activity. It is a reversal from the trend we saw for most of July.
We believe the increase in deposits during July was the SNB actively working to weaken the Franc. This was likely a preemptive move against safe-haven flows, especially as the European Central Bank has signaled potential rate cuts amid slowing Eurozone growth. Now, the SNB appears to be letting the Franc find its own strength.
This shift in policy is likely influenced by stubborn domestic inflation, which recent data from the Federal Statistical Office showed was at 1.8% in July 2025, above expectations. A stronger Franc helps make imports cheaper, which is a tool the SNB has used effectively to control inflation. This creates a clear incentive for the central bank to allow the currency to appreciate.
Potential Market Volatility
We have seen this strategy from the SNB before, particularly during the 2022-2024 period. Back then, the bank consistently sold its foreign currency reserves to strengthen the Franc and fight imported inflation. The current decline in sight deposits could be the beginning of a similar, more aggressive phase of policy tightening.
For derivative traders, this back-and-forth signals that volatility in pairs like EUR/CHF and USD/CHF is likely to increase. The market is now uncertain about the level at which the SNB will intervene, creating opportunities. This environment is ideal for strategies that profit from price swings, such as purchasing straddles or strangles.
In the coming weeks, positioning for a stronger Franc seems prudent. One could consider buying EUR/CHF put options to capitalize on a potential fall in the exchange rate. This approach allows for upside from a strengthening Franc while clearly defining the maximum risk if the SNB changes its stance again.
