investingLive European FX news wrap: Swiss CPI misses, US dollar extends gains

The main highlight of the session was the Switzerland CPI report. The data missed across the board and weighed on the CHF, although it shouldn’t change much for the SNB as the central bank has
already ended its easing cycle and will need strong reasons to go back
into NIRP (negative interest rate policy).

SNB’s
Chairman Schlegel recently said that they expect inflation to pick up a
little in the next quarters. The latest SNB forecast is for inflation
to average 0.4% in Q4.

We then got the final manufacturing PMIs for the major Eurozone economies and the UK. Basically all of them beat the preliminary estimates but didn’t change anything in terms of market expectations given that the market focuses more on new information (preliminary reports).

We also had a few ECB speakers repeating the same old message that they expect inflation to remain around target in the medium-term and small or short-term deviations won’t call for a policy response. Some ECB members continue to add that the next move can even be a rate hike.

Lastly, we got Fed’s Miran repeating that he sees the neutral rate way below the current policy rate and that he wouldn’t focus too much on financial conditions for policy setting. Luckily, he doesn’t matter at all. The Fed voting members are now just 11 for me.

In the markets, the US dollar extended the gains but not against all the major currencies. It hasn’t made a new high versus the GBP, AUD, NZD and JPY. The largest gain on the session was of course against the CHF as the soft Swiss CPI report weighed on the currency.

In the stock markets, the mood remains positive with gains seen across the board, except the UK market which is basically flat on the day. The most notable mover has been the German DAX as the positive Nexperia news over the weekend boosted auto stocks.

Crude oil opened higher on OPEC pause news over the weekend but gave up all the gains and it’s now trading a bit in the negative. Gold and silver are slightly positive on the day but nothing notable there as we’re just consolidating before the next impulsive move on either side.

Lastly, on the bond market front, we are seeing higher yields across the board as the recent US-China deal and hawkish Powell turn are still reverberating in the rates markets.