Societe Generale strategists report that Swiss August Consumer Price Index (CPI) and second-quarter Gross Domestic Product (GDP) both surprised to the upside, prompting profit-taking in EUR/CHF and USD/CHF currency pairs [1]. Despite these stronger data points, the outlook for Swiss National Bank (SNB) policy remains unchanged, as inflation is averaging 0.6% so far in the third quarter, which aligns with the June forecast [1]. The projection is for inflation to continue increasing slightly in the coming quarters, before declining again somewhat in the first half of 2027 [1].
Strategists note that wider G10/SNB rate differentials and low FX volatility may encourage dip-buying in EUR/CHF and G10/CHF pairs, as buyers may be tempted to take advantage of these conditions [1]. However, they caution that renewed focus on French fiscal and political risks, particularly tensions around the French budget and presidential elections, could revive Swiss Franc (CHF) strength [1]. A caveat is highlighted regarding the inverse correlation between EUR/CHF and the 10-year OAT/Bund spread, which has completely broken down since June [1].
Overall, the stronger Swiss data has led to immediate market reactions, such as profit-taking in key CHF pairs, but has not altered SNB policy expectations. The strategists emphasize that while dip-buying opportunities exist, tail risks related to French political developments could shift market sentiment in favor of the Franc [1].
CONCLUSION
Swiss CPI and GDP data surprised to the upside, triggering profit-taking in EUR/CHF and USD/CHF, but SNB policy expectations remain unchanged. Societe Generale sees dip-buying opportunities supported by rate differentials and low volatility, though French fiscal and political risks could strengthen the Franc. Market participants should remain alert to these tail risks when considering CHF positions.