Switzerland’s consumer price index (CPI) rose 0.6% year on year in April. This was up from 0.3% in the previous reading.
The data show that annual consumer price growth increased by 0.3 percentage points. The update compares April inflation with the same month a year earlier.
This rise in inflation to 0.6%, while still low, has changed the immediate outlook for us. It significantly reduces the probability of another interest rate cut by the Swiss National Bank (SNB) at its next meeting in June. We remember the SNB was a first-mover when it cut rates last year in 2025, but this data suggests a more cautious pause is now likely.
For currency derivatives, the focus shifts to a stronger Swiss franc. We should consider positioning for a lower EUR/CHF exchange rate, which is currently hovering around 0.97. Buying put options on EUR/CHF or call options on CHF provides a direct way to trade the view that the SNB will turn more hawkish than the European Central Bank.
In the interest rate markets, we expect Swiss short-term interest rate futures to sell off as the market prices out the likelihood of a near-term cut. Looking at the swap market, the implied probability of a June rate cut has already fallen from over 70% last month to below 50% today. This repricing could continue as more traders adjust their positions.
This environment also presents a challenge for Swiss equities, making protective strategies more appealing. The combination of a potentially stronger franc, which hurts Swiss exporters, and the fading prospect of cheaper borrowing could weigh on the Swiss Market Index (SMI). We are looking at buying put options on the SMI as a cost-effective hedge for the coming weeks.
