Switzerland’s economy is hovering on the edge of deflation, pushing the SNB toward negative rates. The bank abandoned negative rates in 2022, but it may have to return to them. How could this affect the franc? Let’s explore this and make a trading plan for EUR/CHF.
The article covers the following subjects:
Major Takeaways
- Reuters experts rank the franc among the underperformers.
- Faster eurozone growth is positive for EUR/CHF.
- Deflation risks are making Switzerland nervous.
- An SNB rate cut is a reason to buy EUR/CHF, targeting 0.94 and 0.96.
Weekly Fundamental Forecast for Franc
There is only one step from greatness to absurdity. Switzerland’s trade deal with the US to cut tariffs from 39% to 15% boosted the franc against the euro to its highest levels since 2015. Back then, the Swiss National Bank removed the 1.20 minimum exchange rate for EURCHF, and the pair collapsed. At the end of 2025, the pair is rising, either amid currency interventions or amid rumors that the SNB may return to negative rates.
The Reuters consensus forecast ranks the franc as an underperformer in the Forex market, at least among G10 currencies. However, banks disagree on its outlook. Rabobank has revised its three-month EUR/CHF forecast down from 0.93 to 0.92 because the SNB seems unwilling to cut rates and has not mentioned an overly strong “swissie.” If you add demand for the franc as a safe-haven asset, the rally in the pair looks questionable.
Global Currency Forecasts
Source: Reuters.
By contrast, JP Morgan is looking for opportunities to buy EUR/CHF, as faster European growth has traditionally provided a tailwind for the pair. The bank believes that any positive global GDP dynamics will also pressure the “swissie” due to its safe-haven status and extremely low bond yields. As a result, the euro could rise to 0.95 and 0.96 by the end of Q1 and Q4 2026, respectively.
In my view, this scenario looks quite realistic. And it is not only about the eurozone or safe-haven flows. Switzerland risks slipping into deflation, and fighting it caused the SNB plenty of trouble in the past. The bank only abandoned negative rates in 2022, and it may have to return to them. In November, consumer prices did not grow, and core inflation fell to its lowest level since August 2021.
Swiss Inflation Trends
Source: Bloomberg.
Although Martin Schlegel said in November that the current policy is very soft and supports inflation, and most Bloomberg experts do not expect a rate cut in December, anything is possible. The SNB previously forecast that consumer prices would rise by 0.4% in Q4, but the latest data have made those estimates obsolete.
A downward revision would allow investors to discuss a return to negative rates. If not in December, then in March. Of course, the franc can still use shocks in global politics or trade as a reason to strengthen, but this would most likely be limited to corrections.
Weekly Trading Plan for EUR/CHF
In my view, cutting the key rate from 0% to -0.25% at the SNB meeting on December 11 could push EUR/CHF up to 0.94, with room to extend the rally to 0.96. If the SNB keeps policy unchanged, the euro can be bought against the franc on pullbacks.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURCHF in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
