EUR/CHF extends advance as soft Swiss inflation revives rate-cut bets

• EUR/CHF extends gains for a second day as softer Swiss inflation pressures the Franc.
• Swiss CPI slows to 0.1% YoY in October, the lowest since June, reinforcing disinflation concerns.
• Eurozone factory activity stabilizes, with the HCOB PMI confirmed at 50.0, offering mild support to the Euro.

The Euro (EUR) strengthens against the Swiss Franc (CHF) on Monday, as the Franc weakens broadly after Swiss inflation unexpectedly cooled in October. At the time of writing, EUR/CHF is trading around 0.9298, extending gains for the second consecutive day.

The latest figures from the Swiss Federal Statistical Office showed that the Consumer Price Index (CPI) fell 0.3% MoM in October, steeper than the 0.1% decline expected and following a 0.2% drop in September. On a yearly basis, the CPI rose 0.1%, easing from 0.2% in September and missing the market forecast of 0.3%.

The softer-than-expected inflation data, hovering near the lower end of the Swiss National Bank (SNB) 0-2% target range, fueled speculation that the central bank may consider returning to negative interest rates to counter persistent disinflationary pressures. The data challenge the SNB's forecast that inflation will gradually pick up later this year and into 2026, with the central bank projecting an average rate of 0.4% for the current quarter.

According to the latest BHH MarketView report, swaps pricing now assigns a 70% probability of a 25-basis-point cut to -0.25% within the next twelve months, up from 50% previously.

The SNB kept its policy rate unchanged at 0.00% at its September meeting. Earlier in October, SNB Chair Martin Schlegel said the central bank would "observe the situation and adjust monetary policy where necessary," signaling a cautious stance and a reluctance to consider further easing for now. However, Governing Board member Petra Tschudin recently indicated that the SNB remains ready to reintroduce negative interest rates if economic conditions deteriorate, noting that such measures have proven effective in the past.

The latest data also showed that Switzerland's SVME Purchasing Managers' Index (PMI) improved to 48.2 in October from 46.3 in September, beating expectations of 47.5. The slight improvement signals easing contraction, though US tariffs and weak external demand continue to weigh on the sector.

In the Eurozone, the HCOB Manufacturing PMI was confirmed at 50.0 in October, up from 49.8 in September, marking a return to modest growth in factory activity. The improvement offered a mild boost to sentiment toward the Euro and lent additional support to EUR/CHF.