Thomas Stucki, Chief Investment Officer at St. Galler Kantonalbank, expects the Swiss franc to continue rising against the euro due to ongoing political and fiscal pressures in France. According to the interview conducted on October 12, 2026, the recent sell-off in European bond markets differs fundamentally from the sovereign debt crisis that began in 2011. While higher risk premiums currently concentrate primarily on French bonds, rising yields elsewhere in the eurozone reflect a global trend toward higher interest rates originating in the United States. In 2011, the solvency of southern eurozone nations was called into question, leading to a massive loss in the euro's value against the Swiss franc, a dynamic not currently present.
France faces a challenging financial situation characterized by a budget deficit of approximately 5 percent of gross domestic product, which is not offset by a weak nominal GDP growth rate of 1.9 percent. This trajectory points to a rising debt-to-GDP ratio, compounded by a lack of political will to enact painful austerity measures. Ahead of presidential elections slated for the following year, populist parties across the political spectrum are competing with promises of increased spending. Furthermore, recent images of youth protests and governmental paralysis undermine perceptions of the nation as a stable and reliable debtor.
Regarding the European Central Bank, Stucki notes that no immediate reason exists for additional interventions through government bond purchases. Drawing on lessons from previous eurozone debt crises since 2011, the central bank understands that verbal interventions yield limited results, though it retains the necessary processes and mechanisms to calm the market if the eurozone faces genuine peril. The ECB is not expected to hesitate on interest rate hikes due to bond market stress, as the current strain does not threaten the euro's stability, and the central bank remains eager to avoid accusations of underestimating inflation risks. Consequently, a further rate hike in December is considered probable.
The renewed crisis complicates the euro's position as an alternative to the US dollar for large investors seeking to reduce their US exposure, reminding markets of unresolved structural issues within the eurozone, including high national debt levels, weak fiscal discipline, and divergent economic structures among member states. After the Swiss franc recently appreciated from 95 centimes to 93 centimes against the euro before pausing, the initial market reaction has subsided. However, a return to the summer levels of euro strength is viewed as unlikely because the situation in France will remain a prominent factor.
Stucki projects the euro to trade lower against the franc by the end of the year, while remaining above the 90 centimes threshold, leaving previous forecasts unchanged after viewing the move toward 95 centimes as unsustainable. For the Swiss National Bank, a rising franc helps lower import prices and reduce inflation. While the central bank likely views the dampening effect on import prices positively, the speed of the recent appreciation underscores the challenges associated with safe-haven flows. For the SNB, a sharply stronger franc remains a more significant risk than currency weakness.
Fundamentally, no domestic catalyst compels the SNB to alter its policy rate, with inflation remaining comfortably within target despite rising to 1 percent, and the domestic economy requiring neither tightening nor supportive measures alongside a stable franc. Nevertheless, the SNB maintains an interest in eventually moving away from zero rates to build a buffer for future rate cuts, positioning the next policy rate move upward, expected next year depending on foreign interest rate developments.
Looking toward the United States, the US dollar currently benefits from elevated energy prices and associated interest rate expectations, conditions that may persist until the conflict with Iran achieves greater stability. Once that phase concludes, structural issues such as the predictability of US politics will regain prominence, likely driving the dollar lower and pushing the US dollar-franc exchange rate below 80 centimes in the following year. Despite rising US Treasury yields, global equity markets continue to perform resiliently as investors adapt to political headwinds and higher interest rates. The global economy handles the current framework better than anticipated, supported by ongoing positive announcements regarding artificial intelligence infrastructure investments.
Concerning the threshold at which rising yields become critical for equities, the 5 percent mark on ten-year US Treasury bonds previously functioned as a symbolic threshold, yet yields have since climbed to 5.25 percent without triggering widespread liquidations or a mass rotation from equities into bonds. A more dangerous scenario for stock markets would involve a rapid and uncontrolled surge in yields signaling fundamental anxiety regarding US economic stability, requiring a shock event comparable to the tariffs introduced by Donald Trump in April 2025.
