ICYMI – SNB’s Tschudin dismisses the monthly inflation number as just one data point

Data on Tuesday showed Swiss inflation falling to its lowest level level since COVID.

  • consumer prices fell by 0.1% y/y in May, lowest since March 2021
  • the SNB has a 0-2% target range

Swiss National Bank (SNB) board member Petra Tschudin commented on May inflation data.

  • SNB won’t be distracted by monthly inflation numbers
  • “We’re focused on the medium term”
  • “this is just one data point”

Head of the Bank, Chair Martin Schlegel, has repeatedly emphasised that individual month negative numbers are a possibility and that the Band doesn’t necessarily have to react to them.

The SNB next meet on June 19:

  • markets are pricing a 25bp rate cut around 70%, from 0.25 to zero
  • markets are pricing a return to -0.25 around 30%

Negative inflation is being caused largely by the strong Swiss franc, for example the price of imported goods by 2.4%, along with the drop in energy prices.

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan to form think tank focused on Trump tariffs and Taiwan

Japan is set to launch a new think tank to examine how economic security concerns influence supply chains and related sectors, according to Nikkei. The move comes amid growing unease over trade tensions and the situation around Taiwan.

The think tank will operate under the National Security Secretariat (NSS) and form part of a broader strategy to strengthen Japan’s ability to manage economic security risks. Details of the initiative will be included in the government’s upcoming annual economic and fiscal policy guidelines, expected later this month.

NSS will “examine risks faced by industry, strengthen economic intelligence capabilities and comprehensive think tank functions, and reinforce critical infrastructure.”

Info via Nikkei (Japanese media)

This article was written by Eamonn Sheridan at www.forexlive.com.

Forexlive Americas FX news wrap: US dollar firms as the trade war ebbs

Markets:

  • Gold down $27 to $3351
  • US 10-year yields flat at 4.46%
  • WTI crude oil up 90-cents to $63.43
  • S&P 500 up 0.6%
  • USD leads, JPY lags

The US dollar put in a solid performance today and I can pin it on a few things. The rebound was mainly a retracement of yesterday’s fall and that helps to encapsulate it. 1) Yesterday there were some real worries about Russian retaliation from the drone attacks, they haven’t launched any nuclear weapons so that’s good so far. 2) The China-US trade talk is gathering momentum with diplomats talking today and the White House indicating a looming call between Trump and Xi. 3) Fears about Trump re-escalating the trade war after the TACO fiasco are fading, as he appears to be sticking to his plan. 4) JOLTS job openings improved in April despite Liberation Day angst.

The main beneficiary was USD/JPY as it climbed 135 pips to 144.05, wiping out yesterday’s decline. The pair bottomed early in Europe and gains were steady after that, finishing near the highs of the day.

The euro similarly slid and mostly erased yesterday’s gains to leave it largely flat on the week. The market will wait on trade headlines, the ECB and Friday’s non-farm payrolls report.

The dollar gains against the commodity currencies were subdued as the same trade sentiment helped to lift commodities priced and equities. Futures had been solidly negative in Europe but the main US indexes steadily gathered momentum with chip names leading the way.

This article was written by Adam Button at www.forexlive.com.