The EUR/CHF exchange rate rose for a second day due to softer Swiss inflation impacting the Franc. In October, the Swiss Consumer Price Index (CPI) experienced a decline of 0.3% on a monthly basis and a slight increase of 0.1% year-on-year, stirring disinflation concerns.

The Swiss National Bank’s inflation target range is between 0-2%. The latest data may push the SNB to consider cutting interest rates, with market predictions showing a 70% chance of a 25-basis-point cut to -0.25% within a year.

Swiss National Bank Rate Policy

The SNB’s policy rate stayed at 0.00% in September. However, SNB officials hinted at potential rate adjustments if economic conditions worsen. Switzerland’s SVME Purchasing Managers’ Index rose to 48.2 in October, while the Eurozone’s HCOB Manufacturing PMI returned to 50.

Inflation measures the price rise in consumer goods and services, with central banks targeting a manageable rate of around 2%. High inflation typically strengthens a currency as it might lead to higher interest rates, attracting global capital. Conversely, low inflation tends to weaken a currency. Inflation impacts gold prices, with higher rates reducing its appeal compared to interest-bearing assets.

The soft Swiss inflation figures from October 2025 are the main driver for us right now. With year-on-year inflation at just 0.1%, the Swiss National Bank (SNB) is under significant pressure to act against disinflation. This reinforces our view that the path of least resistance for the Swiss Franc is lower.

We see a clear policy divergence forming between the SNB and the European Central Bank. While SNB board members are openly discussing a return to negative rates, recent ECB commentary has focused on wage growth persistence, suggesting they are in no rush to ease policy. This fundamental mismatch supports a continued rise in the EUR/CHF exchange rate from its current level around 0.9300.

Strategies for Profiting from EUR/CHF

For the coming weeks, we are looking at strategies that profit from a rising EUR/CHF. Buying call options with strike prices around 0.9500 for the first quarter of 2026 offers a way to capture potential upside with a defined risk. The market is now pricing a high probability of an SNB rate cut within a year, which should continue to fuel this upward trend.

Looking back, we remember the SNB’s dramatic policy shifts, such as the 2015 de-pegging, which show they are not afraid to act decisively. During the last period of negative interest rates in Switzerland, EUR/CHF spent years trading well above parity. While we are not forecasting a return to 1.10 overnight, history shows that when the SNB starts an easing cycle, the Franc can weaken substantially.

Given this outlook, we are also considering selling out-of-the-money EUR/CHF puts to collect premium, as we believe the SNB’s dovish stance will provide a floor for the currency pair. Last week’s Swiss unemployment data, which showed a slight tick up to 2.3%, adds to the domestic economic concerns and supports the case for SNB action. This makes short-term downside in EUR/CHF seem less likely.

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