Get ready for a thrilling dive into the world of European FX news! A miss in Swiss CPI has sparked a chain reaction, and we're here to unravel the story. But first, let's set the scene: the US dollar is on a roll, extending its gains, but not without a few surprises along the way.
Our journey begins with the Swiss CPI report, which fell short of expectations across the board. This news sent shockwaves through the CHF, but the SNB remains unmoved. With its easing cycle concluded, the central bank would need compelling reasons to revisit negative interest rates.
SNB Chairman Schlegel recently hinted at a slight uptick in inflation over the coming quarters, with the latest forecast predicting an average of 0.4% in Q4.
Next up, we delve into the final manufacturing PMIs for the Eurozone's heavyweights and the UK. While these reports beat preliminary estimates, they failed to sway market expectations, as traders prioritize fresh insights over preliminary data.
And here's where it gets controversial... ECB speakers continue to echo the same message: inflation is expected to hover around the target in the medium term, and minor deviations won't trigger a policy response. Some members even suggest the next move could be a rate hike!
Moving on to the Fed, Miran reiterates his stance, seeing the neutral rate well below the current policy rate. He also downplays the impact of financial conditions on policy decisions. Thankfully, his opinion carries little weight, as the Fed's voting members now stand at a solid 11.
In the markets, the US dollar's gains were selective, with no new highs against GBP, AUD, NZD, or JPY. The biggest mover of the session was the CHF, reacting to the soft Swiss CPI report.
The stock markets maintained a positive mood, with gains across the board, except for the UK market, which remained flat. The German DAX took center stage, propelled by positive news from Nexperia over the weekend, which boosted auto stocks.
Crude oil opened higher on OPEC pause news but quickly retreated, trading slightly negative. Gold and silver showed modest gains, but the real action is yet to come as we consolidate for the next big move.
Lastly, bond yields are on the rise, reflecting the impact of the US-China deal and Powell's hawkish turn on rates markets.
So, what's your take on these developments? Do you agree with the ECB's stance on inflation? And how long will the US dollar's strength persist? Share your thoughts in the comments below!
