Societe Generale strategists note Swiss August Consumer Price Index (CPI) and second-quarter Gross Domestic Product (GDP) surprised to the upside, triggering profit-taking in EUR/CHF and USD/CHF but leaving Swiss National Bank (SNB) policy expectations unchanged. They point out that wider G10/SNB rate differentials and low FX volatility may encourage EUR/CHF dip-buying, while warning that renewed focus on French fiscal and political risks could revive Swiss Franc (CHF) strength.

Stronger Swiss data, cautious Franc risks

“Elsewhere, Swiss August CPI and 2Q GDP surprised to the upside this morning, sparking profit taking in EUR/CHF and USD/CHF.”

“The data should not shift the outlook for SNB policy. Inflation is averaging 0.6% so far in 3Q which is in line with the June forecast. “

“The projection is for inflation to “initially continue to increase slightly in the coming quarters, before declining again somewhat in the first half of 2027. ” Buyers on dips in EUR/CHF and G10/CHF more generally may be tempted, drawing support from wider G10/SNB differentials and low FX volatility.”

“The caveat and tail risk for EUR/CHF is a revival of the inverse correlation with the 10y OAT/Bund spread which has completely broken down since June.”

“Will tensions around the French budget and presidential elections cede advantage to the Franc? “