Insights 
VT 
The Swiss franc has shown strong performance since April 2, when it gained over 7% against the USD. Despite this, Swiss inflation remains soft, with April CPI showing no y/y change and core inflation dropping to 0.6% y/y. This low inflation is challenging for the SNB, which has already reduced rates to 0.25%. The SNB may further cut rates, expecting a 40 basis point reduction, which would return them to negative territory.
In contrast, the CHF is currently underperforming compared to the JPY, a top G10 currency today. As for the euro, its recent strength is under scrutiny due to economic challenges and potential ECB rate cuts. EUR/USD, which recently neared 1.1573, has tested below the 1.13 level. The currency reflects market optimism around US trade deals but faces pressure from trade tensions and potential ECB actions. Market expectations include an ECB rate reduction in June, and EUR/USD is projected to be 1.15 over a 12-month period.
Investment Risks
Readers are reminded that financial markets are inherently risky, and all investment decisions should be carefully assessed for risks and uncertainties without any guarantee of accuracy or timeliness of the information provided.
At present, the underlying theme remains one of diverging policy paths. The Swiss franc has rallied strongly against the US dollar since early April—a move largely driven not by domestic strength, but rather by shifting global rate expectations. While the SNB has taken the initial step with its rate cut to 0.25%, inflation in Switzerland is still lacklustre. April figures showed no headline increase at all, and core inflation has given way to just 0.6% on an annual basis. This seeping softness in price growth leaves room for further dovish action. We now observe market pricing leaning towards at least one more cut, possibly pushing real rates more deeply into negative territory.
However, despite this accommodation from the central bank, the franc’s upward trend has not faltered much, helped by safe-haven flows during broader risk-off episodes. This is where the challenge begins—rate expectations and currency strength are pushing in opposite directions. For those involved in directional strategies, the strength of CHF looks increasingly difficult to rationalise through a purely monetary lens. The pricing asymmetry can, at some point, correct sharply should risk sentiment shift or central bank communication become explicitly more forceful.
Turning attention to Europe, Lagarde’s team faces a different sort of pressure. The euro has tried to hold its ground, even momentarily brushing up against the 1.1570 area before pulling back. But strong resistance remains, and technicals continue to show waning bullish momentum. Inflation dynamics in the eurozone are tilted lower, and the ECB appears more willing than skeptical to proceed with a rate cut as early as June. It’s worth recalling that such policy easing comes not from systemic weakness, but rather from a desire to pre-empt further slowdown.
Euro And Yen Performance
We see the 12-month forecast for EUR/USD touching 1.15, but more immediately, every bounce seems to fade under headline risk—especially from energy volatility, regional fundamentals, and cross-Atlantic data surprises. For positioning, there is increasing tension in medium-term long euro trades without strong conviction behind them. Option skews have begun to reflect more protective demand, indicating that traders prefer owning downside cover rather than chasing upside breakout scenarios.
Meanwhile, the yen, gaining more interest, has quietly outpaced both the franc and euro in relative strength terms during the past week. This isn’t an invitation to assume linear continuation, but it underscores the renewed focus on divergent real yields and policy patience from Tokyo, leaving the currency as one of the more attractive hedges in uncertain times.
In the coming sessions, volatility should stay elevated particularly into upcoming central bank meetings and as market participants reassess growth indicators. From our vantage point, spreads and rate differentials continue to exert strong influence over price action, while sentiment instruments such as risk reversals suggest that demand for downside protection in euro and franc positions is growing. Portfolio-level adjustments seem increasingly consistent with a broader defensive reassessment.
Guided by the last several weeks of moves and how pricing has realigned, one would do well to treat carry exposure with greater selectivity, recalibrating risk thresholds tightly. Dislocations from monetary policy shifts now matter more than directional calls on growth per se, and this will show up further in volatility curves across currency pairs.
The focus now should be on timing shifts and expectation management. No single factor will drive the next major trend, but when rate paths, relative inflation gauges, and geopolitical catalysts all start leaning in the same direction, responses can be swift and extended.
