Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (Mar 17 – Mar 21)

Fed, BoE, BoJ and SNB meetings coupled with retail sales from the US and China as well as inflation from Canada, employment from Australia and Q4 GDP from New Zealand will highlight this jam packed week ahead of us.

USD

President Trump has added additional 25% tariffs on steel and aluminium coming from Canada that should have taken effect on March 12. After Ontorio Prime Minister decided to drop tariffs on energy exports to the US, Trump removed those additional tariffs and only initial 25% tariffs remained. Trump also announced 25% tariffs on EU imports and added a threat of a huge 200% tariff on wines and alcoholic products if they put tariffs on American whiskey. Major bank analysts are increasing probabilities of recession in the US and state uncertainty around tariffs as a major factor coupled with weak consumer confidence.

February inflation report showed headline number down to 2.8% y/y from 3% y/y in January. Monthly print came in at 0.2% vs 0.3% as expected with 0.216% unrounded. Shelter was once again main cause for increase increasing 0.3% m/m and 4.2% y/y which is a smallest yearly increase since December of 2021 . Airfares were the main reason for decline in inflation as they fell by 4% m/m. Core CPI declined to 3.1% y/y from 3.3% y/y the previous month while markets were expecting a 3.2% y/y print. Core m/m reading came in at 0.2% vs 0.3% as expected with 0.227% unrounded. Shelter less energy services rose 0.3% m/m. Supercore printed 0.182% m/m and 2.22% y/y. This decline, although still above 2% when annualized, 0.17% m/m is needed for 2% inflation, will be welcomed by Fed as core services and healthcare showed clearer signs of easing price pressures. PPI has come weaker than expected but figures that go into PCE calculation came in stronger.

The yield on a 10y Treasury started the week at 4.30%, rose to 4.34% and finished the week at around 4.32%. The yield on 2y Treasury started the week at 4.% and reached the high of 4.03%. Spread between 2y and 10y Treasuries started the week at 31bp and finished the week at 29bp as curve flattened. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 3%, while probability of a no cut is around 97%. June is the first meeting that sees above 50% probability of a rate cut. The index following "Magnificent Seven" tech stocks—Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla—plunged into a bear market, falling more than 20% from its highs. Gold has reached the $3000 level.

This week we will have retail sales data and Fed meeting. No change in rate is expected but we will get new SEP and dot-plot which will give us more insight in how Fed sees the economy.

Important news for USD:

Monday:​

• Retail Sales​

Wednesday:​

• Fed Interest Rate Decision​

EUR

Deadline for new stimulus package and debt brake to be voted in Germany is March 25. The inaugural session of the newly elected parliament is set for that date. CDU/CSU and SDP do not have necessary two thirds of new parliament, therefore they are trying to implement them while old parliament is still in session. There was already a push back from Green party stating that they will not support it as it is but that they are willing to work to find a deal. Green party wishes for defense spending proposal to be done with the old parliament while infrastructure spending should be done with the new parliament. On Friday report came out that the deal has been agreed upon.. Incoming Chancellor Merz stated that out of €500bn planned over 12 years €100bn will be spent by states with €100bn will be directed toward Climate and Transformation Fund. EU has announced €26bn in retaliatory tariffs on imports from the US. ECB policymaker and Bundesbank president Nagel warned that US tariffs could push Germany into recession this year.

GBP

UK started the year on a weak footing as GDP for January came in at -0.1% m/m vs 0.1% m/m as expected. Digging into the details we can see that weakness was concentrated in manufacturing and industrial output while services printed 0.1% m/m increase in line with expectations. ONS notes that strong sales in food and drink categories helped services print a positive number. Construction output continued to decline but number came in as expected.

This week we will have BoE meeting. No change in rate is expected, as one cut per quarter still remains as the main idea, but any hints regarding future rate cuts path will be carefully watched.

Important news for GBP:

Thursday:​

• BoE Interest Rate Decision​

AUD

February inflation data from China showed plunge back into deflation with a -0.7% y/y print. China’s statistics office stated that deflation is caused by base effects, holidays (Chinese New Year) and weather. It looks increasingly that CPI will return into positive territory in March. PPI improved a bit as it printed -2.2% y/y, a tick up from -2.3% y/y in January.

This week we will have employment data from Australia as well as industrial production and retail sales from China.​

Important news for AUD:

Monday:​

• Industrial Production (China)​
• Retail Sales (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

Electronic card data, encompassing almost 70% of total retail sales, for the month of February increased 0.3% m/m and dropped 4.2% y/y. Kiwi has been stuck in a range for the week, ending it on a top of the range against USD, but breaking it against CHF.

CAD

Mark Carney is the new Prime Minister of Canada. Former BoC and BoE governor has won majority of votes in party leadership and is now the new leader of Liberal Party after former Prime Minister Trudeau resigned. He is expected to call for new elections.

BoC has lowered rate by 25bp as was widely expected and brought it down to 2.75. They have cut its rate by 225bp since last June. The statement shows that Canada started 2025 on a solid foot but uncertainty surrounding tariffs will likely slow down the economy as “Recent surveys suggest a sharp drop in consumer confidence and a slowdown in business spending as companies postpone or cancel investments.” Inflation remains close to 2% but is expected to increase in March due to end of the tax break. Governing Council will remain vigilant to downward pressures on inflation from weaker economy and upward pressures on inflation from higher costs while also monitoring inflation expectations.

BoC governor Macklem concentrated on tariffs during his press conference. He stated that tariffs will weaken the economy and there is a need to do as much as possible to adjust to their effects. Tariffs are main concern for Canadian economy as almost 76% of Canadian exports go to the US which equates to around 20% of GDP. This data just emphasizes concern about devastating impact potential tariffs could have on the economy. Canada is planing to announce almost CAD30bn in retaliatory tariffs against the US.

This week we will have inflation data expected to go back above 2%.

Important news for CAD:

Tuesday:​

• CPI​

JPY

Labour cash earnings continued to grow in the month of January as they printed an increase of 2.8% y/y in nominal wages. However, when taking inflation into account, real wages plunged -1.8% y/y after being positive in December. Household spending dropped 4.5% m/m and saw increase of 0.8% y/y. The yield on a 10y JGB rose to 1.56%. Toyota, Nissan and Honda all granted their workers increases in line with union’s demands with other major corporations following suite. Rengo, Japan’s largest union, secured first-round wage hikes of 5.46% which comes after 5.10% increase seen previous year.

Final Q4 GDP was revised lower to 0.6% q/q and 2.2% annualized from 0.7% q/q and 2.8% annualized as preliminary reported. Last week’s data showing slowdown in capex in Q4 was the harbinger of downward revision. The deflator was revised up though to 2.9% y/y from 2.8% y/y as preliminary reported showing even stronger inflation pressures hitting the economy.

This week we will have BoJ meeting. Markets are pricing no change in rate with a small chance of surprise rate hike.

Important news for JPY:

Wednesday:​

• BoJ Interest Rate Decision​

CHF

SNB total sight deposits for the week ending March 7 came in at CHF444.1bn vs CHF437.4bn the previous week. The range is narrowing and movements lack direction as SNB lets market dictate Swissy’s strength.

This week we will have SNB meeting where yet another 25bp rate cut, sixth in a year, is expected.

Important news for CHF:

Thursday:​

• SNB Interest Rate Decision​

 

[katetrades]

Forex Major Currencies Outlook (Mar 24 – Mar 28)

Inflation data from the US and the UK coupled with preliminary PMI data from the Eurozone and the UK will highlight the week ahead of us. Please be mindful that this is the last trading week of Q1 so volatility can be increased due to rebalancing.

USD

OECD has cut global growth for 2025 and 2026 citing tariffs as the main culprit. Global GDP growth is seen at 3.1%, for 2025 and 3% for 2026, down from 3.3%, for both years, seen in December. US GDP has been revised to 2.2% in 2025 and 1.6% in 2026 from 2.4% and 2.1% respectively. Canada and Mexico saw their GDP numbers plunge with former printing 0.7% growth in both 2025 and 2026 (2% was seen previously for both years) while latter will see its GDP shrink 1.2% in 2025 and 0.6% in 2026.

February retail sales showed rare miss on expectations in headline number (0.2% m/m vs 0.6% m/m as expected) but the real star of the show was control group. The control group measure jumped 1% m/m after dropping by the same amount in January. Control group excludes volatile components and is considered a better measure of consumption in the economy, as such it is used for GDP calculation. Ex autos and ex autos and gas categories also rose on the month with 0.3% m/m and 0.5% m/m increased respectively. The biggest contributor were nonstore retailers (online) with 2.4% m/m increase followed by health & personal care stores with 1.7% m/m. Department stores, food services & drinking places as well as gasoline stores all recorded drops bigger than 1% m/m.

Fed has left key interest rate unchanged at 4.25-4.50% range as was widely expected. They see economy continue to expand at a solid pace with labour market staying solid. Inflation is coming down but remains somewhat elevated. Starting in April the pace of QT will be slowed down "the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion." Governor Waller dissented as he wished to continue the same pace of run off. New dot plot showed no changes to interest rates as they remain at 3.9% for the end of 2025, 3.4% for the end of 2026 and 3.1% for the end of 2027. Longer-term rate was also left unchanged at 3%. GDP projections have been lowered to 1.7% in 2025 and 1.8% in 2026 from 2.1% and 2% seen in December dot plot. The unemployment rate for 2025 has been lifted to 4.4% form 4.3% seen in December. Inflation numbers were also lifted up and now PCE is expected to end at 2.7% for 2025 vs 2.5% in December while core PCE is seen at 2.8% vs 2.5% at their previous projection in December.

At the press conference Chairman Powell was persistently asked about impact of tariffs on inflation and he characterized it as “transitory”. This is a loaded word as it reminds people of central banks incompetence to properly grasp inflation threat during the pandemic, when they also labelled it as transitory. He dismissed the weakness seen in consumer sentiment and increase seen in consumer inflation expectations. He also emphasized importance of hard data and currently it is giving Fed room to wait with rate cuts. Powell acknowledged apparent moderation in consumer spending but added that wages are growing faster than inflation. Labor is not a source of serious inflation pressures and inflation is expected to reach a 2% target in 2027. Trade, immigration and fiscal policy will see changed by new administration. Uncertainty is unusually elevated and Powell stated that changes in SEP are largely due to trade policy.

The yield on a 10y Treasury started the week at 4.32%, rose to 4.32% and finished the week at around 4.25%. The yield on 2y Treasury started the week at 4.03% and reached the high of 4.04%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 31bp as curve proceeded to flatten. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 17%, while probability of a no cut is around 83%. June is the first meeting that sees above 50% probability of a rate cut. Gold has settled comfortably above the $3000 level.

This week we will have final reading of Q4 GDP as well as Fed’s preferred inflation measure PCE.

Important news for USD:

Thursday:​

• GDP​

Friday:​

• PCE​

EUR

German parliament voted with a 513 votes majority to implement fiscal stimulus and change to the debt brake. The package is for €500bn infrastructure fund over the next 12 years of which €100bn will be directed towards the Climate Transition Fund, that is what Greens pushed for in exchange for their votes in the parliament, while €300bn will be used by federal government and €by state governments. Defense spending of more than 1% of GDP will be exempted from the debt brake and state governments will be allowed to run annual deficits of up to 0.35% of GDP. Bundesrat, the upper house of parliament, has passed the debt reform.

Final February CPI showed 2.3% y/y increase in prices, a tick down from 2.4% y/y as preliminary reported with a 0.4% m/m increase instead of 0.5% m/m as preliminary reported. ECB president Lagarde stated that if US would impose 25% tariffs on imports from the EU it would result with Eurozone GDP decline of 0.3% in the first year and 0.5% if EU imposes retaliatory measures.​

This week we will have preliminary PMI data for the month of March.

Important news for EUR:

Monday:​

• S&P Manufacturing PMI (Eurozone, Germany, France)​
• S&P Services PMI (Eurozone, Germany, France)​
• S&P Composite PMI (Eurozone, Germany, France)​

GBP

Payrolls change for February saw economy add 21k jobs. January ILO unemployment rate stayed unchanged at 4.4%. Average weekly earnings rose 5.8% 3m/y vs 5.9% 3m/y as expected with ex bonus category staying at 5.9% 3m/y as was in December. ONS has provided the usual caveat about the quality of data but BoE will remain concerned with such a strong wage growth and its potential impact on inflation pressures.

BoE has left the bank rate unchanged at 4.50% as widely expected but there were interesting changes. First, the vote was 8-1 in favour of no change (Dhingra voted for a 25bp rate cut) vs 7-2 as markets were expecting with some even seeing potential for a 6-3 vote. Second, there was a sentence in the statement saying “A gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate”. This sentence indicates possibility that we will get less than one cut per quarter, which is currently priced in by markets, which in turn should lead to GBP strength. They have noted substantial progress on disinflation and emphasized increased uncertainties due to global trade policy, tariffs. If inflation pressures are pushed down it would warrant a less restrictive path of bank rate.

This week we will have preliminary March PMI data as well as February inflation data which will be followed closely now that BoE has shifted its focus back on inflation.

Important news for GBP:

Monday:​

• S&P Manufacturing PMI​
• S&P Services PMI​
• S&P Composite PMI​

Wednesday:​

• CPI​

AUD

February employment report was an ugly one. Employment change saw economy losing 52.8k jobs while expectations were for economy to add 30k jobs making it a miss of over 80k jobs. This is the first drop in employment since March of 2024. Looking into the details we see the unemployment rate remaining at 4.1% but only due to a plunge in participation rate to 66.8% from 67.2% in January. Full-time jobs saw a loss of 35.7k while part-time jobs declined by 17.1k. Additionally, previous month’s numbers were revised down and such an ugly report will nudge RBA towards rate cuts and AUD is feeling the pressure.

Data from China for the January-February period saw retail sales print 4% y/y as expected, up from 3.7% y/y in December. Communication appliances led the growth with a staggering 26.2% y/y followed by sports and recreation with 25% y/y while auto sales were down 4.4% y/y. Industrial production came in at 5.9% y/y vs 5.3% y/y as expected and down from 6.2% y/y seen in December. The rail, ships, and aeroplane category led the way with 20.8% with the auto sector growing of 12%. Industrial robots and service robots showed biggest increases in terms of products.

Over the weekend State Council of China published a 30 point plan on how to boost consumption. Boosting consumption was given top priority at last week’s Two Sessions. The main focus will be on increasing capacity and willingness of households to consume. The plan includes steps to improve minimum wage and jobs market as well as support the stock market. In order to improve willingness to spend the plan says it will take measures to increase pensions and improve health insurance. Bonds in the amount of CNY300bn will be issued to help spur consumption, specifically for automobiles, home appliances and electronics.

NZD

Q4 GDP showed growth of 0.7% q/q s 0.3% q/q as expected. The economy returns to growth after declining for past two quarters. GDP continues to shrink on y/y basis as it printed a -1.1%. Current account deficit for the final quarter of 2024 increased by more than expected.

CAD

February inflation data saw headline number jump to 2.6% y/y from 1.9% y/y in January while a 2.2% y/y print was expected. CPI rose 1.1% m/m. All three of core measures increased with median and trim printing 2.9% y/y while common printed 2.5% y/y increase in prices. With tariff threats looming inflation data has taken the backseat. BoC stated previous week that they are focused on keeping price stability but they put tariff risk at the forefront of their concerns.

BoC governor Macklem stated that the main goal in setting monetary policy is to minimize the risk of errors which will mean being less forward-looking than normal but it also means acting quicker when data show greater clarity. He emphasized the potential threat of tariffs on inflation and added that the greater the threat the more focus will have to be on anchoring inflation expectations. Macklem stated that February data fundamentally changed bank’s view and reiterated their commitment to controlling inflation. BoC seems to move to the pause for now as they assess impact of tariffs but they will be ready to act faster than usual in any direction as needed. Prime Minister Carney scheduled elections for April 28.

JPY

BoJ left short-term policy rate unchanged at 0.5% as was widely expected. Accompanying statement showed that economy is recovering moderately while consumer spending is increasing at a moderate pace. Inflation expectations are showing gradual increase while “Underlying inflation expected to align with the BoJ’s price target in the latter half of the three-year outlook period.“ Economy is expected to continue growing above potential. Uncertainty around economic and price outlook remains high with trade tensions the biggest worrying factor.

Governor Ueda stated at the press conference that wage growth from spring negotiations were was in line with their January view then adding that wage growth is on track or maybe even stronger than anticipated. Neutral rate remains unknown and it is hard to tell how tariffs will impact the economy in the short-term. BoJ will watch tariff developments, remain data-dependent and committed to policy normalization. There was no push for faster rate hikes or much hawkish tones in statement and in his remarks but the door for potential rate hike in May has been left open.

February national CPI slowed down to 3.7% y/y from 4.% y/y in January due to renewed government energy subsidies and decline in fresh food prices. Markets were expecting a 3.5% y/y print so this still shows stronger inflation pressures. Additionally, CPI ex fresh food and energy, so-called “core-core” and the one that BoJ closely follows, ticked up to 2.6% y/y from 2.5% y/y the previous month. Domestic services are keeping prices elevated. Rengo, Japanese largest trade union, announced that in second-round data they see an average wage increase of 5.40%. This would mark it a second year of above 5% wage increases and will keep inflation pressures on. Inflation report combined with wage data should give more credence to BoJ rate hike in May.

CHF

SNB total sight deposits for the week ending March 14 came in at CHF448.5bn vs CHF444.1bn the previous week. Deposits are moving from the lower bound as uncertainties around world make Swissy look attractive to some investors. Swiss government has lowered GDP forecasts for 2025 to 1.4% and for 2026 to 1.6% from 1.5% and 1.7% as seen previously. CPI fr 2025 was left unchanged at 0.3% while 2026 CPI was lowered to 0.6% from 0.7% previously. Global trade uncertainty caused by tariffs was the main reason for the downgrade.

SNB has cut interest rate to 0.25% as was widely expected. They have reiterated their willingness to act in FX market if necessary. Emphasis was put on uncertainties troubling global and Swiss economic growth. Inflation trajectory is moving in line with expectations and it is expected to further ease gradually in the coming quarters. New projections see CPI around 0.3% in Q2 and 0.4% for 2025, previous projection was for 1.1% CPI in 2025, with average inflation increasing to 0.8% in 2026 and 2027. GDP was unchanged and it is still seen in the range of 1-1.5% in 2025. Governor Schlegel stated that monetary conditions are now appropriate and that probability of further easing is low.​

 

[katetrades]

Forex Major Currencies Outlook (Mar 31 – Apr 4)

April 2 is the main day, the so-called Liberation Day, where new and reciprocal tariffs will be applied. In addition, we will have NFP, ISM PMI, inflation data from from the Eurozone an Switzerland, PMI data from China and employment data from Canada will highlight the week ahead of us.

USD

The week started with new talks about tariff adjustments. Now instead of targeting entire industries tariffs will be targeted towards countries with significant trade surplus with the US. Exemptions for autos, pharma and chip makers are expected. On Wednesday President Trump announced 25% tariffs on all cars and light trucks made outside of the US. This tariff will also take place on April 2, “Liberation Day”, they will be added on top of other tariffs and will remain in place throughout his mandate. Mexico. Japan, Germany and Canada will be hit the hardest by these new tariffs. Trump has also announced a one month tariff exemption for auto-parts that will last until May 3.

Headline PCE for the month of February was unchanged at 2.5% y/y with a 0.3% m/m print (0.340% vs 0.325% the previous month). Core PCE ticked up to 2.8% y/y from 2.7% y/y in January with a 0.4% m/m vs 0.3% m/m as expected print (0.380% vs 0.285% the previous month). There was almost a full percentage increase in m/m core reading and with it being more than double the necessary 0.17% m/m for a 2% annualized reading it is hard to see chances for a rate cut increasing. Personal income came in at 0.8% m/m vs 0.4% m/m as expected with personal spending increasing 0.4% m/m vs 0.5% m/m as expected, both were higher than in January. Final Q4 GDP reading was revised up to 2.4% from 2.3% annualized in previous readings. Private consumption was revised down while net exports and government consumption were revised up. Atlanta Fed GDP tracker now sees Q1 GDP at -2.8%, down from -1.8% previously.

The yield on a 10y Treasury started the week at 4.26%, rose to 4.40% and finished the week at around 4.27%. The yield on 2y Treasury started the week at 3.97% and reached the high of 4.06%. Spread between 2y and 10y Treasuries started the week at 30bp and finished the week at 38bp as curve returned to bear steepening. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 10%, while probability of a no cut is around 90%. June is the first meeting that sees above 50% probability of a rate cut. Gold has settled comfortably above the $3000 level reaching a new high of $3085.

This week we will have ISM PMI data for the month of March, tariff day on April 2 and NFP data on Friday. Headline number is projected to be at 128k with the unemployment rate remaining at 4.1%.

Tuesday:

• ISM Manufacturing PMI​

Wednesday:​

• “Liberation Day”​

Thursday:​

• ISM Services PMI​

Friday:​

• NFP​
• Unemployment Rate​

EUR

Preliminary March PMI data saw manufacturing PMI rise to 48.7 from 47.6 in February. Manufacturing PMI surge due to front running the threat of tariffs. It is also buoyed by the infrastructure stimulus from Germany with both France and Germany printing big jumps and getting closer to expansion territory. New orders are still contracting, but at a slower pace while export orders could remain under pressure given the trade war and weaker global demand. The report states that manufacturers expanded their output for the first time in two years. Services ticked down to 50.4 from 50.6 the previous month. Domestic demand is more important for services sector than tariff threat and if this is a sign that consumer is stumbling it could be worrisome. Composite was propelled to 50.4 by strong manufacturing readings.

Preliminary CPI data for March showed French reading unchanged at 0.8% y/y while markets were expecting a 0.9% y/y print. Spanish reading dropped to 2.3% y/y from 3% y/y in February, more than 2.4% y/y expected. ECB survey of inflation expectations showed no change in the next twelve months and three years. In combination with softer preliminary prints this will increase chances of another rate cut in April.

This week we will have preliminary inflation reading expected to tick down further and add more credence to the April rate cut talk.

Important news for EUR:

Tuesday:​

• CPI​

GBP

The division between two sectors in the UK economy has deepened further as shown by the preliminary PMI readings for the month of March. Manufacturing PMI declined to 44.6 from 46.4 in February which is new 18-month low while services jumped to 53.2 from 50.9 the previous month, a new six-month high. Composite was lifted by services and printed 52 from 50.5 seen in February.

BoE Governor Bailey stated that raising potential growth of the economy proves to be a challenging task. He emphasized importance of AI and general-purpose tech as well as skilled labor. Additionally, signs appear that businesses delay investments to due to uncertainties surrounding global trade.

February inflation data surprised to the downside with headline number printing 2.8% y/y after a 3% y/y print seen in January. Core reading dropped to 3.5% y/y from 3.7% y/y the previous month while markets were expecting a 3.6% y/y print. Digging into the details we see that the drop was caused by drop in prices of goods while services inflation remains at a very high level of 5%. The report shows both encouraging and worrying signs and it is not sure to move BoE towards further rate cuts.

Chancellor of the Exchequer Reeves unveiled Spring statement which showed that GDP is expected to be around 1% in 2025 and average around 1.75% over the rest of the decade. The statement shows further spending as cuts to welfare budget and government spending will come in effect in four years’ time. The debt issuance for the next twelve months has not been changed and stays at £300bn.

AUDFederal budget announcement saw GDP for 2026 at 2.25% and 2.5% for 2027. Tax cuts were also announced such as the tax rate for the $18,201 to $45,000 threshold will be reduced to 15% from 16% from July 1 2026 with additional cut to 14% from July 1 2027. This is seen as a political move to gather support for the second term of current Prime Minister Albanese. February CPI reading ticked down to 2.4% y/y from 2.5% y/y as seen in January. Although monthly reading does not encompass full scope of inflation seeing it go down will be welcomed by the RBA.

This week we will have RBA meeting where no change is expected. Additionally, we will get official March PMI data from China.

Important news for AUD:

Monday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

Tuesday:​

• RBA Interest Rate Decision​

NZD

Consumer confidence for the month of March continued to deteriorate and printed 93.2 vs 96.6 in February. Kiwi was stuck in the range for most of the week as markets were unwilling to push it either way due to quarter end rebalancing flows and incoming tariffs.

CAD

Canada started the year on a strong footing with GDP increasing 0.4% m/m vs 0.3% m/m as expected. Increases were broad based as 13 out of 20 sectors saw improvements. The increase was led by goods producing industries while services rose modestly. Advanced February reading sees GDP coming in flat. Tariff concerns are the main driver of CAD so April 2 is critical for future of the economy.​

This week we will have employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

Preliminary March PMI data showed all three numbers printing below 50. For services and composite this is the first drop into contraction since October. Manufacturing came in at 48.3, down from 49 in February as output and new orders showed stronger declines. Positives can be seen in growing new export orders and employment while both input and output prices declined. Services dropped to 49.5 from 53.7 the previous month and dragged composite with them to 48.5 from 52 in February. Services sector recorded outright decline in output while new orders, new export orders and employment showed weaker growth. Output prices showed weaker inflation while input prices showed stronger inflation due to rising wages. Services showed weaker positive outlook while manufacturing showed stronger positive outlook.

Minutes from the last week#s BoJ meeting showed members getting increasingly confident that underlying inflation will reach 2% target. Additionally, some members feel that even when rates get increased real rates will still stay deep in negative territory due to high inflation. There were no hints on future path of monetary policy. Yield on 10y JGB reached a new high of 1.58%.

Governor Ueda had some comments during the week that negatively impacted JPY. He stated that cost-push inflation will likely dissipate in time and that if the food price increases prove to be only temporary then BoJ should not respond using monetary policy tools. He clarified that if increase in food prices proves to be sustained and pushes up services prices as a result then it could lead to wide-range inflation which will warrant further rate hikes.

March inflation data for the Tokyo area saw all three measures come hotter than expected and all three print above BoJ’s 2% target. Headline number came in at 2.9% y/y vs 2.8% y/y the previous month while markets were expecting a slowdown to 2.7% y/y. Ex fresh food component printed 2.4% y/y vs 2.2% y/y as expected and in February while ex fresh food, energy component printed 2.2% y/y vs 2% y/y as expected and up from 1.9% y/y the previous month. Governor Ueda is unwilling to commit to rate hikes until he has more information about tariff developments but this hot inflation print increases chances of a May hike.

CHF

SNB total sight deposits for the week ending March 21 came in at CHF440.4bn vs CHF440.7bn the previous week. Virtually no change as SNB lets market dictate Swissy’ strength.

This week we will have inflation data.

Important news for CHF:

Thursday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Apr 7 – Apr 11)

RBNZ meeting, inflation data from the US and China as well as the FOMC meeting will highlight the week ahead of us that will be dominated by reciprocal tariff implementation on April 9 at 12:01 am.

USD

ISM manufacturing for the month of March came in at 49 vs 49.5 as expected and down from 50.3 in February. Production dropped below 50 while both new orders and employment dropped deeper into contraction. Prices paid component surged to 69.4, highest since June of 2022, as front running of tariffs led to bloating of input prices. Tariff uncertainty is hurting the sector.

February JOLTS data showed 7568k job openings vs 7762k in January. Quits rate came in at 2%. It has been steadily declining indicating that there are fewer jobs available or that they are less attractive. Declining quits rate leads to employers having less concern about keeping employees and thus it lowers their need to increase wages.

US President Trump delivered on his threats on “Liberation Day”. Countries were slapped with massive tariffs with imports from China being hit by 34% tariff on top of 20% for a total of 54%! Switzerland was hit with 31%, Japan with 24%, EU with 20%, United Kingdom and Australia with 10%. Tariffs are much bigger than markets expected and they could have devastating effect on the world trade, potentially plunging world into a recession. Goods that comply with USMCA continue to be exempt from tariffs so now new tariffs on Mexico and Canada. They are still tariffed for fentanyl and migration issues. The baseline tariffs of 10% will be imposed on April 5 at 12:01am. Reciprocal tariffs will be imposed on April 9 at 12:01am. This all leaves plenty room for further renegotiations of tariffs. China has announced on Friday that it will put a 34% tariff on all US goods as a retaliation. China tariffs will take place on April 10.

March ISM services PMI printed 50.8 vs 53 as expected, a drop from 53.5 in February. Business activity increased while prices paid component decreased. On the other hand, new orders barely managed to stay in expansion with a 50.4 print while new export orders plunged into contraction territory. The biggest drop was seen in employment index which plunged to 46.2 from 53.9 the previous month. Tariff effects are the main concern for employers and majority of them is not looking to add more stuff until they get more clarify on the economic outlook.

Employment report for the month of March saw economy add 228k jobs vs 135k jobs as expected. The unemployment rate ticked up to 4.2% but it was followed by an uptick in participation rate (62.5% vs 62.4% in February). U6 underemployment rate ticked down to 7.9% but it is still very elevated. Wages rose 0.3% m/m, after a 0.2% m/m increase in February, but yearly figure slowed down to 3.8% increase from 4% increase the previous month. Healthcare added 54k jobs, leisure and hospitality added 43k jobs while government added 19k jobs. Next month’s employment report should show us first effects of DOGE cuts as well as cuts connected to the newly implemented tariffs.

The yield on a 10y Treasury started the week at 4.24%, rose to 4.24%, dropped below 4% after tariff announcement and finished the week at around 4%. The yield on 2y Treasury started the week at 3.92% and reached the high of 4.06% and then finished the week below 4%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 33bp as curve stayed unchanged. FedWatchTool sees the probability of a 25bp rate cut at May meeting surging to around 30%, while probability of a no cut is around 70%. Gold had a violent week as gold fell to around $3050 on deleveraging. WTI crude has fallen bellow $61, a two-year low and finished the week at around $62.

This week we will have FOMC minutes and reciprocal tariff implementation as well as March inflation figures.

Important news for USD:

Wednesday:

• FOMC Minutes
• Reciprocal Tariffs

Thursday:

• CPI

EUR

Preliminary March inflation for the Eurozone printed 2.2% y/y as as expected, a tick down from 2.3% y/y seen the previous month. Services inflation also came down and printed 3.4% y/y. German reading printed matched the Eurozone reading while data from Italy showed a jump to 2% y/y from 1.6% y/y in February. Core CPI also came down printing 2.4% y/y down from 2.6% y/y the previous month and lower than 2.5% y/y as expected. Good news for the ECB.

GBP

Final manufacturing PMI for the month of March was revised up to 44.9 from 44.6 as preliminary reported. Still, the reading represents a 17-month low with lowest business optimism since November of 2022. Output, new orders and new export orders all recorded steeper drops. The report shows that companies are facing deteriorating market conditions and rising costs due to increases in national minimum wage. Services printed 52.5, lower than 53.2 as preliminary reported, but still an improvement from 51 seen in February. Composite was lifted to 51.5 from 50.5 the previous month.

AUD

RBA has left cash rate unchanged at 4.10% as was widely expected. Accompanying statement shows that underlying inflation is moderating while level of uncertainty is increasing. Members still see monetary policy as restrictive and warn that risks to inflation are on the both sides. The bank remains data-dependent.

Governor Bullock reiterated that bank’s main goal is to return inflation back to their 2-3% target which necessitates restrictive monetary policy. She added that there was no explicit talk of rate cuts at the meeting and that the decision to keep rates unchanged was made by consensus. Tariff threats are creating uncertainties. Inflation along with labor data and tariff impact will be closely monitored when deciding on future rate moves. At the moment, the bank is in “wait and see” mode.

Official PMI data for the month of March from China saw manufacturing rise to 50.5, highest since the March of 2024. Production and new orders index both moved further into expansion while new export orders inched closer to returning into expansion by posting a highest print in almost a year. Prices paid continues to decline confirming overwhelming deflationary pressures in the economy. Services PMI rose to 50.8 from 50.4 which helped push composite to 51.4 from 51.1 in February. Caixin manufacturing printed 51.2, up from 50.8 thus making it six consecutive months in expansion. The report shows similar results as official reading, increases in output and new orders, slight improvement in employment and weak pricing environment.
This week we will get inflation data from China.

Important news for AUD:

Thursday:

• CPI (China)

NZD

Business confidence ticked down in March to 57.5 from 58.4 in February. Biggest increases were seen in residential construction, profit expectations and ease of credit categories. Cost expectations and price intentions increased as well warning about persistent inflation pressures as indicated by rising inflation expectations. Declines were seen in export, investment and employment intentions.

This week we will have RBNZ meeting. Rate cut has been telegraphed in advance but now since NZD has been hit pretty hard after tariff announcement we will see what changes to the economic outlook will bank members make.

Important news for NZD:

Wednesday:

• RBNZ Interest Rate Decision

CAD

March employment report saw economy lose 32.6k jobs vs adding 10k jobs as was expected. The details point to even more worrying picture. The unemployment rate ticked up to 6.7% but unlike in the US, this increase was followed by a tick down in participation rate to 65.2% from 65.3% in February. Composition of jobs showed that economy lost 62k full-time jobs while it added 29.5k part-time jobs. Wage growth has slowed down to 3.6% y/y from 3.8% y/y the previous month. Canada has managed to avoid reciprocal tariffs and goods that comply with USMCA agreement are exempted from tariffs but the cracks in labor market are mounting.

JPY

February retail sales showed increase of 0.5% m/m and 1.4% y/y while industrial production, for the same month, showed a strong 2.5% m/m increase. The unemployment rate ticked down to 2.4%. BoJ has decided to lower purchases of JGB in the 10-25y tenor. Reduction in demand from BoJ will lead to higher yields on those bonds which in turn will be supportive of JPY. Liberation Day caused a stir in the markets and a massive risk off sentiment and JPY was the biggest beneficiary with USDJPY rising to the highest level in past three weeks.

CHF

SNB total sight deposits for the week ending March 28 came in at CHF451.2bn vs CHF449.2bn the previous week. Deposits have been steadily increasing for four consecutive weeks and are moving towards the upper bound of a range. March CPI saw no changes with headline number printing 0.3% y/y while core printed 0.9% y/y. Swissy was the biggest beneficiary of Trump tariffs, although Switzerland was slapped with 31% in reciprocal tariffs.

 

[katetrades]

Forex Major Currencies Outlook (Apr 14 – Apr 18)

ECB and BoC meetings, inflation from the UK, Canada and New Zealand, employment from the UK and Australia, retail sales from the US and China will be of great importance on the economic news side of things, but tariff talks will still take the center stage and dominate markets.

USD

On Wednesday April 9 at 12:01am reciprocal tariffs went into full effect. Then during Wednesday President Trump stated that reciprocal tariffs would be postponed by 90 days on all countries except on China which will be hit by staggering 145% tariffs. Sudden pull back of tariffs led to massive risk on mood in the markets with NASDAQ finishing the day up 12%, second best day in the history of index, while S&P was up 8% for eight-best day in history.

March inflation report saw inflation decline by more than expected with headline number printing 2.4% y/y vs 2.6% y/y as expected and down from 2.8% y/y in February while core reading printed 2.8% y/y vs 3% y/y as expected, down from 3.1% the previous month. Headline number saw deflation as it printed -0.1% m/m while core reading rose by 0.1% m/m. Airlane fares saw the biggest price drop (-5.3%). These data points are from before introduction of tariffs so although they are very encouraging they cannot be taken at face value.

The yield on a 10y Treasury started the week at 3.86%, rose to 4.52%! due to disorderly action in the Treasuries market and finished the week at around 4.48%. The yield on 2y Treasury started the week at 3.43% and reached the high of 3.81%. Spread between 2y and 10y Treasuries started the week at 36bp and finished the week at 52bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at May meeting surging to at around 22%, while probability of a no cuts is around 78%. Gold has dropped below $3000 at the start of the week only to rise to new all time highs above $3200 as dip buyers stepped in. WTI crude has fallen bellow $55 for a new two-year low, then surged to $62 after reciprocal tariffs were postponed only to finish week at around $60. VIX has surged to over 50 on Wednesday.

This week we will have retail sales data. They will not have their usual usefulness as report will capture period before the tariffs, but still it will give us clues regarding health of US consumer.

Important news for USD:

Wednesday:​

• Retail Sales​

EUR

Germany has formally agreed on coalition, CDU, CSU and SPD, that will lead the government. New policies state that government will examine possible reactivation of some nuclear power plants which would be a huge help for the industry and economy on the whole. The goal will also be a medium-term free trade agreement with US as well as reduction in import tariffs on both sides. Plan is also to cut corporate tax by 1% for five years starting in 2028.

This week we will have ECB meeting. Another rate cut is expected, bringing rate down to 2.25%.

Important news for EUR:

Thursday:​

• ECB Interest Rate Decision​

GBP

February GDP saw a jump to 0.5% m/m from being flat in January and much stronger than 0.1% m/m as expected. Services sector contributed strongly with 0.3% m/m vs 0.1% m/m as was expected. Q1 GDP will show economy growing but UK was also hit with a 10% tariffs so it will reflect badly on Q2 GDP.

This week we will get employment and inflation data.

Important news for GBP:

Tuesday:​

• Payrolls Change​
• Unemployment Rate​

Wednesday:​

• CPI​

AUD

Impacted by huge tariffs Chinese Yuan plunged to the lows of 7.43 against the USD. China has retaliated by increasing tariffs on imports from the US to 84% and then again on Friday to 125%! China state that it will not retaliate further even if US continues ramping tariffs on them. March inflation report saw headline CPI print -0.1% y/y, second month in a row of negative prints, after a -0.7% y/y print in February. PPI, on the other hand, accelerated its decline as it printed -2.5% y/y vs -2.2% y/y the previous month. Both food and non-food inflation declined m/m. Beef prices led declines in food inflation while transportation facility prices had biggest decline in non-food inflation. Deflation is holding firm in China and with tariffs surging it should prompt PBoC to cut interest rates.

This week we will get employment data from Australia and industrial production and retail sales from China.

Important news for AUD:

Wednesday:​

• Industrial Production (China)​
• Retail Sales (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

RBNZ delivered a 25bp rate cut as was widely expected and brought official cash rate to 3.50%. Tariffs are front and centre of their concerns and as their effects become clearer RBNZ will have room to cut further. Global trade barriers put global growth in danger and in turn hurt the New Zealand economy. Future policy decisions will be determined by the outlook for inflationary pressure over the medium term and monetary policy response to tariffs will focus on the medium-term implications for inflation.

This week we will get Q1 inflation data.

Important news for NZD:

Thursday:​

• CPI​

CAD

Building permits for the month of February rose by 2.9% after falling by 4.3% in January. CAD has been moved by risk on/risk off mood in the markets for the entire week. The currency benefited from broad USD weakness and reached previous resistance from 2022 now turned to support in USDCAD.

This week we will get inflation data and BoC meeting. BoC has stated at their previous meeting that they are pausing and evaluating effects of tariffs so there should be no change to rate at this meeting, but a 25bp rate cut cannot be ruled out.

Important news for CAD:

Tuesday:​

• CPI​

Wednesday:​

• BoC Interest Rate Decision​

JPY

February labor cash earnings saw a growth of 3.1% y/y after a downwardly revised 1.8% y/y growth in January. Still, with inflation being high, real wages have printed -1.2% y/y for the month making it a second consecutive month of declining real wages. Spring wage negotiations are in full force and those wage increases should help propel real wages back in positive territory. Japan economy minister will start negotiations with US on tariffs on April 17.

CHF

SNB total sight deposits for the week ending April 4 came in at CHF443.7bn vs CHF451.2bn the previous week. Another small move within well-established range. Due to risk off mood in the markets caused by tariff implementation Swissy has strengthened a lot so it would be interesting to see if SNB will use sight deposits to fight Swissy strength.​

 

[katetrades]

Forex Major Currencies Outlook (Apr 21 – Apr 25)

Preliminary April PMI data from the Eurozone, UK and Japan will be the most important economic news events in the week ahead of us. Trump posts and headlines regarding the tariffs and trade war will again drive the market. Also note that European markets will be closed on Monday due to Easter Monday.

USD

Fed Governor Waller stated that in a case of recession he would vote for deeper and faster rate cuts. On the impact of tariffs he divided situation into two scenarios. Scenario 1 sees tariffs of 25% on average or more which would cause inflation to peak at around 4-5% after which it would drop meaningfully with the unemployment rate rising to as high as 5%. He said that in this situation he would opt for faster and bigger cuts than previously thought. He labelled these cuts as “bad news” cuts. Scenario 2 sees tariffs of 10% on average which would cause inflation to peak at around 3%. Since these tariffs would not increase the chance of recession Fed would most likely cut in the second half of the year and those cuts were labelled as “good news” cuts.

Retail sales report for the month of March saw headline number come in at 1.4% m/m vs 1.3% m/m as expected and up from 0.2% m/m in February. Motor vehicle parts and dealers saw the biggest increase followed by building materials and garden equipment while gasoline stations showed the biggest decline. Control group, excluding volatile components and thus a better gauge of consumer health, rose by 0.4% m/m vs 0.6% m/m as expected, however, February reading was revised up to 1.3% m/m from 1% m/m as previously reported. This is a good report, showing a healthy consumer, with caveat that jump in motor vehicle parts sales may be due to frontrunning of tariffs.

The yield on a 10y Treasury started the week at 4.45%, rose to 4.50% and finished the week at around 4.34%. The yield on 2y Treasury started the week at 3.92% and reached the high of 3.98%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week at 53bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 9%, while probability of a no cuts is around 91%. Gold has settled above $3300. WTI crude rose on new sections on Iran oil and finished the week at around $64.

EUR

German ZEW survey for the month of April saw current conditions improve to -81.2 from -87.6 in March but expectations category plunged to -14 from 51.6 the previous month on the back of concerns regarding tariff impact. Expectations for the Eurozone fared similarly as they dropped to -18.5 from 39.8 the previous month. Final inflation numbers for March were both unchanged at 2.2% y/y for headline number and 2.4% y/y for core.

ECB has delivered a 25bp rate cut thus bringing the deposit rate to 2.25% as expected. The statement emphasized that disinflation process is well on track and that Governing Council remains committed to bringing it down to the 2% target. The part regarding policy rate “becoming meaningfully less restrictive” has been omitted. Additionally, Governing Council is not pre-committing to any rate path as they remain in data-dependent and meeting-by-meeting decision mode.

President Lagarde stated during the press conference that downside risks have increased and it will bring down Eurozone growth through lower exports. She clarified that the decision to cut by 25bp was unanimous and added that strong EUR will help push inflation down towards their target. There was a debate about a 50bp insurance cut but it did not gain traction. Additionally, she stated that the economy is facing a negative demand shock caused by tariffs and did not comment on neutral rates.

This week we will have preliminary April PMI data.

Important news for EUR:

Wednesday:

• Manufacturing PMI (Eurozone, Germany, France)
• Services PMI (Eurozone, Germany, France)
• Composite PMI (Eurozone, Germany, France)

GBP

Payrolls change for the month of March saw a decline of 78k jobs which followed a drop of 8k jobs seen in February. ILO unemployment rate for February stayed at 4.4% while wages saw slower growth with weekly earnings rising 5.6% 3m/y vs 5.7% 3m/y as expected and ex bonus category printing 5.9% 3m/y vs 6% 3m/y as expected. These data are still tainted by the surveying issues stated by the ONS but they do hint to some weakening in the labor market.

March inflation data saw headline number tick down to 2.6% y/y from 2.8% y/y in February. Core reading also ticked down to 3.4% y/y as expected from 3.5% y/y the previous month. Additionally, services inflation declined to 4.7% y/y from 5% y/y seen in February. This print will be well received by the BoE which are expected to provide a rate cut at their meeting in May.

This week we will have preliminary April PMI data.

Important news for GBP:

Wednesday:

• Manufacturing PMI
• Services PMI
• Composite PMI

AUD

Minutes from the April RBA meeting showed that it is not yet possible to determine timing of next move in rates and that more clarity will be at the May meeting. The Board saw both upside and downside risks for the economy and inflation and emphasized that it will be very important to safeguard progress made on inflation and not to ease prematurely. They have also expressed their concerns regarding tightness of the labor market and added that wage growth could continue to slow.

March employment report saw a bounce back from February as employment change showed 32.3k jobs added after a drop of 57.4k the previous month. The unemployment rate ticked up to 4.1% from downwardly revised 4% in February while expectations were for it to print 4.2%. Participation rate also ticked up, 66.8% from 66.7% the previous month. Full-time jobs increased by 15k while part-time jobs expanded by 17.2k.

March trade balance from China saw effects of frontloading due to incoming tariffs. Trade surplus was $102.64bn with exports surging 12.4% y/y vs 4.6% y/y as expected. Seminconductors and LCD displays saw biggest increases in exports. Exports to the US have increased despite the initial 20% tariffs. On the other hand, imports declined by 4.3% y/y indicating weak domestic demand. Car imports plunged almost 50% followed by double digit declines in steel and lumber. In the coming months we will have a much more different picture of trade data as April tariffs start distorting global trade.

Q1 GDP saw a growth of 1.2% q/q vs 1.4% q/q as expected and down from 1.6% q/q in Q4 of 2024. On a yearly basis economy grew by 5.4% beating expectations of 5.1%. Miss on quarterly growth print caused many analysts to downgrade their assessment of China’s GDP for 2024 towards lower half of 4%. This means that more support, fiscal and monetary, is needed for China to reach its 5% target. Economic data for the month of March saw industrial production surge 7.7% y/y from 5.9% y/y in February as frontloading of tariffs put factories into overdrive. Retail sales jumped to 5.9% y/y from 4% y/y seen the previous month.

NZD

RBNZ Chief Economist Conway warned that the balance of risks shifted to the downside as tariffs will impact global economic activity and thus lead to lower than expected growth in New Zealand. Q1 inflation data came in higher than expected with 0.9% q/q print vs 0.5% q/q in Q4 and 2.5% y/y vs 2.2% y/y in the previous quarter. RBNZ’s preferred inflation measure, sectoral factor model, printed 2.9% y/y, down from 3.1% y/y in the previous quarter and back into the targeted range of 1-3%.

CAD

March inflation report saw headline number drop further to 2.3% y/y from 2.6% y/y in February. Core measures were also down with common and trim at 2.3% y/y and 2.8% y/y vs 2.5% y/y and 2.9% y/y respectively. Median was unchanged at 2.9% y/y.

BoC left rates unchanged at 2.75% as was widely expected by the markets. Tariffs are again taking central stage in the statement showing high uncertainty regarding economic outlook regardless of the tariff scenario. Two scenarios are mentioned. First, “uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year.” They also clarify that there are many other scenarios possible. Tariffs are slowing down economy as they negatively impact both consumer and business confidence. There was no clear guidance on policy but the statement ends with “Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians."

The bank has provided projections based on two scenarios stated in the previous paragraph. In the case of first scenario, limited tariffs, 2025 GDP is seen at 1.6%, 2026 at 1.4% and 2027 at 1.7%. CPI is seen at 1.8% in 2025, 2% in 2026 and 2.1% in 2027. In the case of second scenario, a protracted trade war, 2025 GDP is seen at 0.8% with 2026 seen at -0.2% before bouncing back to 1.6% in 2027. CPI is seen at 2% in 2025, then jumping to 2.7% in 2026 and reverting back to 2% in 2027. Governor Macklem spoke at the press conference and highlighted that BoC is navigating carefully adding that they did consider cutting rates.

JPY

BoJ Governor Ueda stated that tariffs may warrant a policy response. The bank will spend more time assessing the impact of tariffs on the economy but risks surrounding U.S. tariff policy have moved closer towards ‘bad’ scenario BoJ envisioned. March inflation data for the entire country of Japan saw headline number tick down to 3.6% y/y from 3.7% y/y in February, but core inflation numbers rose. Ex fresh food component rose to 3.2% y/y as expected from 3% y/y the previous month while ex fresh food and energy component, core-core, rose to 2.9% y/y as expected from 2.6% y/y in February. Rising inflation should pressure BoJ into action but tariff uncertainty keeps them waiting. President Trump stated that talks with Japan regarding trade deal are progressing nicely and that sides are getting close to the deal. We are not hearing the same from the Japanese side, but given the history between two countries we can easily see deal being negotiated soon. After that BoJ will have much clearer picture on how to proceed with monetary policy.

CHF

SNB total sight deposits for the week ending April 11 came in at CHF446.9bn vs CHF443.7bn the previous week. The print is highest for the year, but barely and it could be said that it is sitting at the top of the range more than it is a breakout.

 

[katetrades]

Forex Major Currencies Outlook (Apr 28 – May 2)

BoJ meeting, preliminary Q1 GDP from the US and Eurozone, inflation data from the US, Eurozone and Australia as well as official PMI data from China will dominate the economic news in the week ahead of us while statements from the White House and President Trump surrounding tariffs will continue to have big impacts on markets and investors.

USD

President Trump has toned down his rhetoric. Now he sees deal being struck soon although there were no official communication between him and president Xi. On the other hand, he backtracked his previous calls for firing of Fed Chairman Powell. In his previous posts he called him “Too Late” and urged him to cut interest rates adding that Powell’s "termination can't come soon enough". Then on Wednesday there was a report from Wall Street Journal that White House is considering lowering tariffs on China in order to de-escalate. New tariffs would consist of 35% tariff on nine strategic items, 100%+ tariffs on goods tied to national security and they would be phased in over five years. Markets were happy with the change of tone as well as attempts to de-escalate and as a result risk assets enjoyed a good week.

On Friday, Trump gave an interview to Time Magazine in which when asked “If we still have high tariffs, whether it's 20% or 30% or 50%, on foreign imports a year from now, will you consider that a victory?” he replied with “Total victory”. These are not the words that markets would enjoy so the rally stalled and indices consolidated.

The yield on a 10y Treasury started the week at 4.34%, rose to 4.44% and finished the week at around 4.29%. The yield on 2y Treasury started the week at 3.82% which was the high and finished the week at around 3.74%. Spread between 2y and 10y Treasuries started the week at 53bp and finished the week at 55bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 5%, while probability of a no cuts is around 95%. Gold has reached new highs as it touched $3500, then plunged bellow $3300 but managed to finish the week above $3300.

This week we will have preliminary Q1 GDP reading as well as Fed’s preferred inflation reading PCE. Additionally, we will get ISM Manufacturing PMI for the month of April and NFP on Friday. Headline number is expected to come at around 140k with the unemployment rate staying at 4.2%.

Important news for USD:

Wednesday:

• GDP
• PCE

Thursday:

• ISM Manufacturing PMI

Friday:

• NFP
• Unemployment Rate

EUR

Preliminary PMI data for the month of April showed weakness in the Eurozone economy, but less than feared. This report shows the first glimpses of the economy after the Liberation Day (April 2). Manufacturing managed to tick up to 48.7 from 48.6 in March as they increased production and slowed the pace of job cuts. Services sector is where the real weakness is as it dropped into contraction with a 49.7 print. The sector saw a faster drop in new businesses. Inflation pressures are painting a brighter picture as they show input prices staying relatively steady while increase in output prices slowed significantly. Composite barely managed to stay in expansion as it printed 50.1, down from 50.9 the previous month.

This week we will have preliminary Q1 GDP reading as well as preliminary April inflation reading.

Important news for EUR:

Wednesday:

• GDP

Friday:

• CPI

GBP

BoE policymaker Greene stated in an interview that pricing is reflective of global factors and that supply side issues concern him more. She added that weak USD would be disinflationary for the UK and that services pose a bigger threat to inflation than wage growth, especially given the inflation persistence seen in services. According to her, neutral rate is now higher than it was and it is not unreasonable to see it between 3.25-3.50%.

Flash PMI readings for the month of April saw further deterioration in economic conditions as manufacturing printed 44, down from 44.9 in March with services falling into contraction with 48.9 vs 51.5 as expected and down from 52.5 the previous month. This is the first time services dropped into contraction since October of 2023. The report highlights aggressive job cuts and faster declines in business optimism across the economy. Composite was also dragged down into contraction with a 48.2 reading vs 51.5 in March. Q2 has started on a weak note and, although it is still too early. indicates a negative growth for the quarter.

AUD

Spokesperson for the Chinese Foreign Ministry stated that they are prepared to fight tariff war if needed. He added that countries are not in talks on tariffs at and that US needs to stop with threats if they wish to start talking. Chinese Commerce Ministry reiterated that there are no negotiations between US and China at the moment and added that if US really wants to start trade negotiations they should lift all unilateral tariffs levied against China.

This week we will have inflation data from Australia and official PMI data from China.
Important news for AUD:

Wednesday:

• CPI
• Manufacturing PMI (China)
• Services PMI (China)
• Composite PMI (China)

NZD

March saw bigger trade surplus than in February. This along with a risk on move in the markets helped Kiwi rebound against risk off currencies such as JPY and CHF. Currency also appreciated against EUR, AUD and GBP but lost ground against USD strength.

CAD

Survey of incoming federal elections sees Liberals winning the outright majority of 170 votes followed by Conservatives with around 120. This will officially put former BoE and BoC governor Mark Carney as Prime Minister of Canada. Retail sales for February came in as expected at -0.4% m/m but advanced March reading sees them rising by 0.7% m/m.

This week Federal Elections will be held.

Important news for CAD:

Monday:

• Federal Elections

JPY

Preliminary April PMI data showed manufacturing tick up to 48.5 from 48.4 in March thus keeping the sector in contraction for the tenth straight month. New orders dropped to the levels not seen in more than a year while business confidence plunged to the levels not seen in the past five years. The report highlights uncertainties surrounding economic outlook, trade environment, staff shortages and ageing population. Services jumped to 52.3 from 50 the previous month, returning into expansion. Inflation pressures are continuing to increase in both sectors. Composite was lifted back to expansion to 51.1 from 48.9 in March. Services PPI ticked up in March to 3.1% y/y from 3% y/y back in February showing more inflationary pressures building.

Tokyo area inflation data surged in April. Companies set new prices in April and it is reflected in report. Headline CPI printed 3.5% y/y vs 3.3% y/y as expected and up from 2.9% y/y in March. Inflation pressures were broad based which poses additional concern regarding high running inflation. Ex fresh food component printed 3.4% y/y, a full percentage point higher than 2.4% y/y the previous month, as well as higher than 3.2% y/y as expected. BoJ is expected to stand pat at next week’s meeting due to high uncertainties surrounding tariffs, but this reading may prompt them to hike in June.

This week we will have BoJ meeting. No change in rate is expected as bank is still grappling with potential effects of tariffs on the economy.

Important news for JPY:

Thursday:

• BoJ Interest Rate Decision

CHF

SNB total sight deposits for the week ending April 18 came in at CHF448.3bn vs CHF446.9bn the previous week. Another week of miniscule increase as deposits try to break the ceiling for the year.

 

[katetrades]

Forex Major Currencies Outlook (May 5 – May 9)

Fed and BoE meetings coupled with employment data from Canada and New Zealand as well as ISM services PMI will highlight the week ahead of us.

USD

Treasury expects to borrow $514bn in Q2 with assumption for an end-of-June cash balance of $850bn. The borrowing estimate is $391bn higher than announced in February 2025, primarily due to the lower beginning-of-quarter cash balance and projected lower net cash flows. For the Q3 Treasury expects to borrow $554bn with assumption for an end-of-September cash balance of $850bn. QRA showed unchanged issuance from the first quarter.

United States and Ukraine signed an agreement on Wednesday to establish United States-Ukraine reconstruction investment fund. “Treasury Department and the U.S. International Development Finance Corporation (DFC) will work together with the Government of Ukraine to finalize program governance and advance this important partnership. “

Advanced reading of Q1 GDP printed -0.3% vs 0.3% annualized as expected. Consumer spending has plunged to 1.8% from 4% in the previous quarter and contributed just 1.21pp to the overall reading. The biggest detractor from the GDP was, of course, net trade which took away 4.83pp as imports surged 41.3% during the quarter in order to avoid tariffs. Government spending also negatively contributed to the GDP as it detracted 0.25pp. Additionally, PCE price index jumped to 3.6% from 2.4% in the previous quarter indicating that inflation remains sticky.

March PCE report saw headline number drop to 2.3% y/y from 2.5% y/y in February with monthly inflation coming in flat and even in deflation when unrounded (-0.04%). Core reading printed 2.6% y/y as expected and came down from upwardly revised figure of 3% y/y. Monthly figure also printed flat with unrounded number at 0.028%. Services inflation increased 0.15% m/m, lower than 2% target if annualized, while services ex shelter came down to 3% y/y from 3.4% y/y seen in February. Fed will be very happy with these data points.

ISM manufacturing PMI for the month of April slipped further into contraction with a 48.7 reading vs 49 in March thus beating expectations of 48. Improvements were seen in new orders and employment indexes with prices index also ticking up, but that is not a good sign as it shows sticky inflationary pressures. On the other hand, production and new export orders plunged with backlog of orders also showing decline.

April employment report saw headline NFP number at 177k vs 130k as expected. The unemployment rate remained at 4.2% while participation rate ticked higher to 62.6% from 62.5% in March. Undermployment rate (U6) ticked down to 7.8%. Average hourly earnings cooled as they came in at 0.2% m/m and 3.8% y/y vs 0.3% m/m and 3.9% y/y as expected. Average weekly hours ticked up though to 34.3 from 34.2 the previous month. Government added only 10k jobs while the rest (167k) were private payrolls. There was also a surge in full-time jobs which rose by 305k. Healthcare continued to add jobs with 51k jobs added followed by transportation and warehousing with 29k jobs. Leisure and hospitality saw almost no change to jobs. This report shows no worrying signs for the labor market and odds of a June cut are diminishing.

The yield on a 10y Treasury started the week at 4.24%, rose to 4.33% and finished the week at around that level. The yield on 2y Treasury started the week at 3.74%, rose to 3.83% and finished the week at around that level. Spread between 2y and 10y Treasuries started the week at 50bp and finished the week at 50bp. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 2%, while probability of a no cuts is around 98%. Chances of a June rate cut fell below 50% after NFP.

This week we will have ISM service PMI and Fed meeting. No change is expected at this meeting but we should be getting some clearer hints about potential June cut.

Important news for USD:

Monday:​

• ISM Services PMI​

Wednesday:​

• Fed Interest Rate Decision​

EUR

Preliminary Q1 reading of Eurozone GDP came in at 0.4% q/q and 1.2% y/y vs 0.2% q/q and 1.1% y/y as expected. French Q1 GDP saw it improve to 0.1% q/q from -0.1% q/q in Q4 of 2024. The details are not encouraging as they showed no contribution from consumption and a big drop in exports. Changes in inventory managed to propel GDP into positive category. German GDP grew by 0.2% q/q as expected and same as in the first quarter of 2024, after a -0.2% q/q in the previous quarter.

Final manufacturing PMI for the month of April was revised up to 49 from 48.7 as preliminary reported. Both German and French readings were revised up and now show increases for every month of the 2025, four consecutive increases. Additionally, Italian reading smashes expectations while Spanish reading came in below. Output has increased as a result of falling input prices.

Preliminary April inflation report for the Eurozone saw headline number drop to 2.2% y/y from 2.5% y/y in March while a drop to 2.1% y/y was expected. More worrying is the jump in core reading to 2.7% y/y from 2.4% y/y the previous month which was bigger than 2.5% y/y markets expected. Rise in core will give headaches to the ECB. French inflation remained at 0.8% y/y for the third straight month while German ticked down to 2.1% y/y from 2.2% y/y in March but markets were expecting a 2% y/y print.

GBP

Final manufacturing PMI reading for the month of April saw a positive revision to 45.4 from 44 as preliminary reported thus making the reading improve from 44.9 in March. The details are not encouraging at all. The main reason for better than preliminary reading was increase in input prices which rose to a 28-month high. New orders and especially new export orders as well as employment all decreased.

This week we will get BoE meeting where a 25bp rate cut is penciled in.

Important news for GBP:

Thursday:​

• BoE Interest Rate Decision​

AUD

Q1 inflation data saw headline number come in at 2.4% y/y, unchanged from previous quarter, but higher than 2.2% y/y as expected. Core measure dropped to 2.9% y/y, as expected, from 3.2% y/y seen in Q4 of 2024. RBA targets core inflation in 2-3% range and with it falling into the range for the first time since Q4 of 2021 it significantly raises odds of another rate cut in May. Elections will be held on May 3.

Official PMI data for the month of April showed first deterioration in economic activity caused by “Liberation Day” tariffs. Manufacturing dropped down into contraction with a 49 reading vs 50.5 in March. The biggest drop was seen, of course, in the new orders index which plunged to 44.7 from 49 the previous month. Non-manufacturing PMI fared better as it printed 50.6, staying in expansion and helped keep composite in expansion as well with a 50.2 print, down from 51.4 the previous month. Caixin manufacturing PMI managed to stay in expansion with a 50.4 reading but details paint a worrisome picture. New orders managed to increase slightly but new export orders plunged. There were drops in jobs and input prices while business optimism decreased sharply. PBoC deputy governor stated that RRR and interest rates will be cut at an appropriate time as focus is on economic growth.

NZD

Kiwi has enjoyed risk on mood in the markets spurred by rumours about trade talks between US and China. Any deescalation or lowering of tariffs between two countries is seen as good for the commodity currencies and China proxies and kiwi gained against all majors.

This week we will get Q1 employment data.

Important news for NZD:

Wednesday:​

• Employment Change​
• Unemployment Rate​

CAD

Liberals won election Carney officially new Prime Minister. However, they have won 169 seats in the parliament but 172 are needed for majority. New cabinet should be announced on May 18.

February GDP saw economy shrink by 0.2% m/m vs coming in flat as expected. This decline comes after 0.4% m/m growth in January and with advanced reading for March seen at 0.1% m/m it should bring a positive Q1 reading for Canada. The issues will start in April and Q2 when we see effects of tariffs on economic activity.

This week we will get employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

BoJ has left rate unchanged at 0.50% as was widely expected but come out with less hawkish, more dovish tone. Inflation forecasts have been slashed down and core CPI is now seen at 2.2% y/y for 2025, down from 2.4% y/y in January. Core-core reading is seen at 2.3% y/y vs 2.1% y/y in January, but it is seen coming down below 2% to 1.8% y/y in 2025 vs 2.1% y/y as was seen in January. Growth expectations have also been revised down with 2025 GDP now seen at 0.5% vs 1.1% in January. Uncertainty surrounding economy is very high and risks towards economic outlook and inflation are skewed to the downside. On the trade barriers caused by tariffs the bank sees case for higher input costs and thus lower demand if disruptions in global logistics lead to restructuring of supply chains. BoJ Governor Ueda repeated dovish messages but at the end added that "delay in price goal timing doesn't mean a delay in hikes" indicating that intention is still to continue with rate hikes.

CHF

SNB total sight deposits for the week ending April 25 came in at CHF451.1bn vs CHF448.3bn the previous week. Deposits have been rising for four straight weeks and now reach levels seen at the end of March. Additionally, SNB is lowering the threshold factor for the remuneration of sight deposits of account holders subject to minimum reserve requirements from 20 to 18, effective as of 1 June 2025. This move should move funds deposited in the bank into real economy.​

 

[katetrades]

Forex Major Currencies Outlook (May 12 – May 16)

Inflation and retail sales data from the US, employment from the UK and Australia and preliminary Q1 GDP from the UK and Japan will highlight the economic news this week while tariff and trade deals talk continue to hold grip on markets.

USD

ISM services for the month of April came in at 51.6, up from 50.8 in March and much better than 50.2 as expected. The details of report show increases in new orders and employment index with latter getting closer to returning to expansion. On the other hand, there was a jump in prices paid index indicating growing inflation pressures. There was also a huge drop in imports as tariff front loading is behind us.

US – China trade talks have started over the weekend in Geneva, Switzerland. US Treasury Secretary Scott Bessent was leading the US delegation. President Trump stated that he is “not open to pulling back on the 145% tariffs”. Later on, as the meeting approached he stated that “80% Tariff on China seems right! Up to Scott B” indicating his desired level but putting the decision in Bessent’s hands. On the other side, US and UK managed to agree on terms for trade deal. This deal is a preliminary deal but as such it represents a “substantial” move towards the final deal. CNN White House reporter stated that 10% tariffs, a part of universal 10% tariffs imposed by US, will remain in place. Tariffs on aluminium and steel were lowered to zero as a part of the deal and UK car exports will be tariffed 10% instead of 25%. New Pope has been elected and he is a first American-born Pope. He took name Leo XIV.

Fed has left rate unchanged at 4.25-4.5.% at their May meeting as was widely expected. The statement shows Fed clarifying that apart from drop in net exports "recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated." This is a hawkish sounding message and it will lower chances of a June cut. Adding to the hawkish message is this part "Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen." The Committee will now take international developments as well as an input into their decision making process.

Powell presser said that labor market is not source of inflation as wage growth is moderating. He warned that surveys of households and businesses show sharp declines and added that current policy stance is well calibrated for the current climate. Trade, immigration, fiscal policy and regulation are places where new administration is implementing policy changes. Powell repeated several times that upward risks for inflation and unemployment have risen. "Wait and see" is the expression Powell repeated more than ten times. President Trump was not happy with Fed’s decision and he took it to his social media account to call Chairman Powell “FOOL”.

The yield on a 10y Treasury started the week at 4.31%, rose to 4.39% and finished the week at around 4.37%. The yield on 2y Treasury started the week at 3.83%, rose to 3.89% and finished the week at around 3.88%. Spread between 2y and 10y Treasuries started the week at 48bp and finished the week at 49bp. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 17%, while probability of a no cuts is around 83%. Bitcoin has crossed $100k mark reaching highs of $104k.

This week we will have inflation and retail sales data. Headline inflation is expected to tick up while core should remain unchanged.

Important news for USD:

Tuesday:​

• CPI​

Thursday:​

• Retail Sales​

EUR

Friedrich Merz, leader of CDU/CSU, failed to secure 316 necessary votes needed to be elected Chancellor of Germany. The governing coalition has a majority of 12 seats in the Parliament but Merz did not get all of the votes. The voting was done in secret so it was not sure whether voters from CDU/CSU voted against him or it was voters from SPD. This is the first time in German history that a designated chancellor did not get the required votes. However, due to the fact that CDU/CSU and SPD hold a two-thirds majority in the Parliament they managed to organize a second vote on the same day. The second vote was successfully and Merz was voted as the new Chancellor with 325 votes.

GBP

BoE has delivered a 25bp rate cut at their May meeting, as was widely expected, thus bringing the rate down to 4.25%. The vote was 7-2 in favour of a rate cut while markets were expecting it to be a unanimous vote. Two members, Dhingra and Taylor, voted for a 50bp rate cut, while two dissenting members, Mann and Pill, voted for no change, they wanted rate to stay at 4.50%. The statement shows that members feel that rate is still restrictive and will help in continuing fight to bring inflation to 2% target. On the future moves the statement shows that “Gradual and careful approach to further withdrawal of monetary policy restraint remains appropriate.” The minutes show that inflation is still expected to average around 3.5% in Q3.

BoE governor Bailey stated at the press conference that disinflation in domestic prices continues and is expected to continue. He added that overall impact of tariffs on inflation remains uncertain and that bank is watching closely developments on the US-UK trade deal. The two dissenting votes make this a hawkish cut and GBP strengthened on the back of that.

This week we will have employment and preliminary Q1 GDP data.

Important news for GBP:

Tuesday:​

• Payroll Change​
• Unemployment Rate​

Thursday:​

• GDP​

AUD

Governing Labor party won elections that were held on May 3 and increased its number of seats to 85 from 77 as held previously. The number of seats needed for majority is 76. Labor has also increased its presence in Senate as they now occupy 28 seats compared to 26 previously.

PBoC has announced rate cuts in order to stimulate the economy. 7-day reverse repo rate has been cut by 10bp to 1.40% from 1.50% while RRR (Reserve Requirement Ratio) was cut by 50bp thus bringing the rate to 9% from 9.50% previously. Interest rate cut will go in effect on May 8. The RRR cut, expected to add almost 1tn RMB in liquidity, will take effect on May 15. Additionally, there were moves to ease loans for autos and to support consumption and tech sector. President Xi has visited Moscow where he met with president Putin. They have issued joint statement which shows that countries intent to ramp up cooperation in order to decisively counter US efforts to contain them. Additionally, they will continue to strengthen their military cooperation.

April trade balance data showed surprisingly good numbers. In dollar terms exports have increased by 8.1% y/y, much better than 2% y/y as expected. Exports to the US have dropped by 21% y/y. Imports declined by 0.2% y/y making trade surplus $96.18bn. Tariff impact was much smaller than feared as numbers suggest, although some analysts point out jumps to exports into ASEAN region as a sign of re-routing exports to the US.

This week we will have employment data.

Important news for AUD:

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

Q1 employment report saw employment change up by 0.1% q/q after dropping by the same amount in Q4 of 2024. On a y/y basis it printed -0.7%. The unemployment rate was unchanged at 5.1%, markets were expecting an increase to 5.3%, but participation rate declined to 70.8% from 71% in the previous quarter.

CAD

April employment report provided us with some positives and some negatives. On the positive side we have economy adding 7.5k jobs vs losing 25k as was expected. All of the jobs added were full-time (31.5k) while part-time jobs showed losses (-24.2k). On the negative side we have the unemployment rate rising to 6.9%, highest since September of 2021, from 6.7% in March while markets were expecting 6.8% print. To ease the blow we have a tick up in participation rate to 65.3%. Wage growth was unchanged from the previous month at 3.5% y/y.

JPY

Final services reading for the month of April ticked up to 52.4 from 52.3 as preliminary reported and rebounded nicely from 50 in March. From the report we can see that services recovered due to notable improvement in demand. Business confidence has plunged to the levels last seen in January 2021 due to rising uncertainties surrounding global trade. Additionally, input costs have continued to increase, now reaching a new two-year high, which prompted companies to increase their prices and thus pass the burden onto the consumer.

March wages data showed nominal wages grew by 2.1% y/y, slowdown from 3.1% y/y in February. When adjusted for inflation, real wages declined by 2.1% y/y making it third straight months of falling real wages. Household spending for the same period increased by 2.1% y/y with report stating that some signs of consumption recovery are starting to appear.

This week we will have preliminary Q1 GDP data.

Important news for JPY:

Friday:​

• GDP​

CHF

SNB total sight deposits for the week ending May 2 came in at CHF454.1bn vs CHF451.1bn the previous week. Another move higher as deposits are trying to breakout of the range and shoot higher.

April inflation report saw headline number came in flat for the year, down from 0.3% y/y in March while markets were expecting a 0.2% y/y print. This is the first time since March of 2021 that inflation printed 0. Core number also dropped printing 0.6% y/y, down from 0.9% y/y the previous month. Deflationary forces mount and if Swissy continues to strengthen due to risk off sentiment in the market, lower growth, lower global trade, it cannot be ruled out that May reading will be a negative one. This would in turn increase the probability of SNB returning to negative interest rates in order to fight off Swissy strength and lift inflation.

SNB Chairman Schlagel stated that Swissy has recently strengthened significantly. He added that no one likes negative interest rates but if the situation calls for it the bank is prepared to go in that direction. Additionally, he added that the bank has been expecting inflation to go down.​

 

[katetrades]

Forex Major Currencies Outlook (May 19 – May 23)

RBA meeting, Preliminary PMI data from the Eurozone and the UK coupled with inflation data from the UK and Canada as well as industrial production and retail sales from China will highlight the news this week with unavoidable trade comments and posts from the president Trump.

USD

US and China have released a joint statement following their meeting in Geneva over the weekend agreeing to lower tariffs on China imports to base 10% plus 20% levy on fentanyl. China has agreed to lower tariffs on US imports also to 10%. This will be applied for the period of 90 days. This move is intended as a baseline mechanism for further negotiations between countries regarding economic and trade relations. President Trump posted over the weekend that prescription and pharmaceutical prices will be lowered by 30-80%. Later on he clarified the amount by posting that “Drug prices to be cut by 59% plus!”

April inflation report showed headline number tick down to 2.3% y/y from 2.4% y/y in March with a 0.2% m/m print vs 0.3% m/m as expected (0.221% unrounded). This is the lowest print since February of 2021 and getting closer to 2% target. Shelter was again dominating category in inflation increase printing 0.3% m/m and 4% y/y. Drops were seen in airline fares, used cars, apparel and food prices. Core reading was unchanged at 2.8% y/y as expected with a 0.2% m/m vs 0.3% m/m as expected (0.237% m/m unrounded). Core services rose by 0.3%. Super core growing at 0.159% m/m and 1.78% y/y making it four months below Fed's 2% target

After a very strong March retail sales report, boosted by front-loaded buying to avoid tariffs, April was a subdued month. Headline retail sales grew by 0.1% m/m while control group declined by 0.2% m/m. The biggest increases were seen in food services and drinking places followed by building material dealers. The biggest declines have been seen in sporting goods and musical instrument stores followed by miscellaneous store retailers. April still saw improvement in headline number after a huge jump in March so nothing to worry regarding strength of consumer going into the Q2.

The yield on a 10y Treasury started the week at 4.39%, rose to 4.55% and finished the week at around 4.43%. The yield on 2y Treasury started the week at 3.91%, rose to 4.07% and finished the week at around 3.95%. Spread between 2y and 10y Treasuries started the week at 49bp and finished the week at the same level. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 8%, while probability of a no cuts is around 92%. September is now the first month with greater than 50% probability of a rate cut.

EUR

Final German CPI was unchanged at 2.1% with Spain CPI and French CPI also coming unchanged at 2.2% y/y and 0.8% y/y respectively while Italian CPI was revised down to 1.9% y/y from 2% y/y as preliminary reported.

This week we will have preliminary PMI data for the month of May.

Important news for EUR:

Thursday:​

• Manufacturing PMI (Eurozone, Germany, France)​
• Services PMI (Eurozone, Germany, France)​
• Composite PMI (Eurozone, Germany, France)​

GBP

BoE policymaker Lombardelli stated that policy remains restrictive and that caution in further moves remains appropriate. She added that wage growth remains too high for the targeted inflation and pointed it out as her main focus when looking for disinflation. BoE policymaker Greene echoed her colleagues thinking that wages inflation measures are still too high, but they are moving in the right direction. She added that some slack opened in the labor market and warned that risks to productivity are to the downside. BoE policymaker Taylor stated that in his opinion neutral rate is in 2.75-3% range. BoE policymaker Mann, biggest hawk, stated that labor market is proving to be more resilient than they expected. She added that worrying signs are showing in increasing inflation expectations by households and that she wants to see companies facing loss of pricing power.

April saw another negative payrolls change number as economy lost 33k jobs after losing 47k jobs in March. ILO unemployment rate for March ticked up to 4.5% as requested. Wage growth, slowed down, with average wages rising 5.5% 3m/y and ex bonus category rising 5.6% 3m/y. This reflects comments from policymakers that wage growth is elevated and carefully watched for future decisions.

Preliminary Q1 GDP saw economy grow by 0.7% q/q vs 0.6% q/q as expected. Services sector also grew by 0.7% while production grew by 1.1%, due to producers working to front-load tariffs, with no growth coming from the construction sector. Real household consumption grew by 0.2% while business investment surged by 5.9%. Net trade and government consumption contributed negatively to the reading, although in volume terms experts grew faster than imports, with former falling by 1.4% and latter declining by 0.5%.

This week we will have April inflation and preliminary PMI data for the month of May.

Important news for GBP:

Wednesday:​

• CPI​

Thursday:​

• Manufacturing PMI​
• Services PMI​
• Composite PMI​

AUD

We got a stellar April employment report. Employment change came in at 89k vs 20k as expected! The unemployment rate remained the same at 4.1% while participation rate jumped to new record high of 67.1% from 66.8% in March. Full-time jobs have added the majority of new jobs with 59.5k while part-time jobs added 29.5k jobs. The strength of labor market may cause some changes at the RBA meeting next week.

This week we will have RBA meeting as well as industrial production and retail sales data from China. Markets are pricing 25bp rate cut but considering huge jump seen in April jobs report they may opt for another pause.

Important news for AUD:

Monday:​

• Industrial Production (China)​
• Retail Sales (China)​

Tuesday:​

• RBA Interest Rate Decision​

NZD

RBNZ survey of inflation expectations saw 1-year rising to 2.41% from 2.15% in January while 2-year rose to 2.29% from 2.06% as previously surveyed. Inflation expectations have been coming down steadily and this increase is worrying. RBNZ focuses more on 2-year and it is yet to be seen if this is just a bump in the downtrend or something more sinister.

CAD

Building permits for the month of March, a very volatile data series, dropped 4.1% m/m after rising 4.9% m/m in February. Final manufacturing sales continued to decline as they printed -1.2% m/m after falling -0.2% m/m the previous month. Wholesale trade managed to increase in March by 0.2% m/m but at a slower pace than 0.3% m/m in February.

This week we will have April inflation data.

Important news for CAD:

Tuesday:​

• CPI​

JPY

After three consecutive quarters of positive growth Q1 GDP showed contraction. It came in at -0.2% q/q and -0.7% y/y vs -0.1% q/q and -0.2% y/y as expected. Private consumption was flat for the second quarter in a row while private investment grew by 1.4% q/q making it the only positive. Net exports subtracted 0.8pp from the reading as exports declined 0.6% while imports grew by 2.9%. GDP deflator printed 3.3% y/y increasing from 2.9% y/y in Q4 indicating increasing inflation pressures in the economy. BoJ has said for months in every statement that economy is recovering moderately so it will be interesting to see how they will react to this setback. It should tone down their rhetoric and move rate hikes further into the latter part of the year. On the other hand, US – Japan trade deal would help greatly with economic recovery.

CHF

SNB total sight deposits for the week ending May 9 came in at CHF453.2bn vs CHF451.1bn the previous week. Steady rise in deposits as market developments are causing Swissy to weaken to the great delight of SNB. US Secretary of Treasury Bessent stated that Switzerland has moved up to the top of the queue on trade deals.​

 

[katetrades]

Forex Major Currencies Outlook (May 26 – May 30)

RBNZ meeting coupled with GDP from the US and Canada, FOMC minutes, PCE and official PMI data from China will highlight the economic data for the week. Tariff talks will again be the main point of focus for the markets. Monday is a holiday in the US, Memorial Day, so US markets will be closed and liquidity will be lower.

USD

Moody’s, a credit rating agency, has downgraded US credit rating from Aaa to Aa1. They were the last credit rating agency to downgrade US. Moody’s now predict that the deficit could increase to staggering 9% of GDP by 2035 mostly due to high interest payments.

The yield on a 10y Treasury started the week at 4.48%, rose to 4.62% and finished the week at around 4.51%. The yield on 2y Treasury started the week at 4.01%, rose to 4.03% and finished the week at around 3.98% while the yield on a 30y Treasury crossed the 5% level at the beginning of the week as a result of Moody’s downgrade and went as high as 5.15%. Spread between 2y and 10y Treasuries started the week at 45bp and finished the week at 58bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 5%, while probability of a no cuts is around 95%. September is now the first month with greater than 50% probability of a rate cut. Bitcoin reached new all time high of $112k.

This week we will have FOMC Minutes, second reading o Q1 GDP and Fed’s preferred inflation measure PCE,

Important news for USD:

Wednesday:​

• FOMC Minutes​

Thursday:​

• GDP​

Friday:​

• PCE​

EUR

ECB Governing Council member Schnabel expressed caution over the weekend regarding June rate cut. She stated that it is too early to make that decision and added that warned that falling energy prices and subsequent slowing global growth could lead to lower inflation in the short term but that could all reverse in the medium term. She also expressed her mounting uncertainties caused by global trade tensions. Later on during the week she added that “disinflation is on track, but new shocks are posing new challenges”. ECB policymaker Knot echoed Schnabel call stating that mid-term inflation is too uncertain to say whether June cut is needed. Be mindful that they are among the most hawkish members.

Final headline and core CPI for the month of March came as preliminary reported at 2.2% y/y and 2.7% y/y respectively. Former number was unchanged from the March reading while latter saw increase from 2.4% y/y print the previous month. The numbers could already be conjured based on final readings from the major countries published previous week.

Preliminary May PMI saw manufacturing continue to improve and print 49.4 after 49 in April. Manufacturing has been rising every month in 2025, reaching a 33-month high and is getting closer to expansion territory. Services dropped into contraction with a 48.9 print after a 50.1 print the previous month. Composite was also dragged down into contraction as it reported a 49.5 print. Divergence between France and Germany continued with former showing improvements across the economy while latter experienced drop in services and increase in manufacturing.

GBP

Inflation report for April saw headline number jump to 3.5% y/y from 2.6% y/y in March. Core reading printed 3.8% y/y vs 3.6% y/y as expected and up from 3.4% y/y the previous month. Services inflation surged to 5.4% y/y from 4.7% y/y in March. Digging into the details we can see that almost half of the rise in inflation was due to increase in road tax. Additionally, due to Easter being in April, there was a surge in airline fares of 28% m/m! The Bank of England expects inflation to rise to 3.7% by September, before falling back to the target rate after that. Markets are lowering odds of future BoE rate cuts, June is definitely off the table, but August cut is being put into question.

BoE Chief Economist Pill clarified his decision for a no change vote as a “skip” within continuing withdrawal of monetary policy restriction. He added that inflation indicators are causing concern and that he feels that one 25bp cut per quarter is too much. Additionally, he stated that according to him disinflation process continues and that rates will continue to come down adding that they should not be dependent on how data turns out.

May PMI results saw manufacturing decline further into contraction with 45.1 vs 45.4 in April. Services managed to return into expansion with a 50.2 print after 49 the previous month. However, it was not enough to propel composite into expansion as it printed 49.4 vs 48.5 in April. The report shows subdued optimism about next year and that confidence rebounded.

AUD

RBA has delivered a widely expected 25bp rate cut thus bringing the cash rate to 3.85%. The statement shows that board assesses that this rate cut will make monetary policy somewhat less restrictive. Inflation continues to come down and although inflation is expected to rise during this year, it will go only up to the upper levels of 2-3% target and will be around midpoint of that range throughout much of the forecast period. Global trade situation poses a threat and increases uncertainties around outlook. In making future decisions the board “will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.”

New forecasts saw downgrades to GDP growth and it is now seen at 1.8% in June 2025, 2.2% in June 2026 and 2.2% in June 2027. The unemployment rate is seen ticking up to 4.2% in June, then up to 4.3% in December where it is expected to stay until June of 2027. Cash rate is seen coming down to 3.2% in June of 2026.

Governor Bullock stated that there were discussions whether to cut by 25bp or 50bp and that more adjustments to rate are possible. She added that the main focus of RBA is to keep inflation down and that policy is in a good place to do that. Additionally, she emphasized heightened uncertainty admitting that they were “blown out of the water by the scope of US tariffs”. In the end she confirmed that the bank is data dependent. This all took its toll on AUD that weakened after such dovish messages.

April economic data from China showed industrial production increasing by 6.1% y/y vs 5.5% y/y but down from tariff-induced front-running of 7.7% y/y in March. On the other hand, retail sales rose by 5.1% y/y vs 5.5% y/y as expected and lower from 5.9% y/y the previous month. Although it is still a healthy number miss on expectations is a bit concerning given how much the entire government is focused on raising consumption. Household appliances as well as gold and jewellery, furniture posted biggest y/y growth while auto sales showed almost no growth. PBoC has proceeded and delivered a 10bp rate cut to their 1-year and 5-year LPR bringing them down to 3% and 3.5% respectively.

This week we will have official PMI data from China.​

Important news for AUD:

Saturday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

NZD

Q1 PPI data showed input prices increase by 2.9% q/q after falling -0.9% q/q in Q4 of 2024 while output prices rose 2.1% q/q after declining by -0.1% q/q the previous quarter. According to data the biggest contributors to growth in prices were electricity, gas, water and waste services. They were up 49.4% for input prices and 26.2% for output prices. Producers are facing larger costs, as indicated by rising input prices, but it is not clear if they are passing it all to consumers and as such contribute to inflationary pressures.

This week we will have RBNZ meeting where a 25bp rate cut is fully priced in.

Important news for NZD:

Wednesday:​

• RBNZ Interest Rate Decision​

CAD

April CPI report saw headline number drop to 1.7% y/y from 2.3% y/y in March while a 1.6% y/y reading was expected. February print was 2.6% y/y, so inflation growth has slowed down almost a full percentage point. Food and shelter were biggest contributors to inflation while clothing and transportation recorded biggest declines. However, core numbers showed increases. Median and Trim both crossed 3% level with a 3.2% y/y and 3.1% y/y readings respectively, up from 2.9% y/y prints in March. Common printed 2.5% y/y after 2.3% y/y the previous month. BoC will look to pause at their next meeting as core numbers are getting out of the upper bound of inflation target range.

This week we will have Q1 GDP data.

Important news for CAD:

Friday:​

• GDP​

JPY

Preliminary May PMI data saw improvement in manufacturing with a 49 print, after 48.7 print in April. The reading has been steadily moving closer towards expansion but it is still staying in contraction for eleventh straight month. Details show that factory output declined faster than in April while new orders and new export orders declined by a slower pace compared to last month. On the inflation side, input costs continued to rise, but at a slowest pace in over a year while output prices were down to the lowest in almost four years. Services declined to 50.8 from 52.4 in April, still in expansion for the seventh month in a row but not enough to keep composite in expansion as it fell to 49.8 from 51.2 the previous month. Machinery orders exploded in March by rising 13.4% m/m and 8.6% y/y thus lowering recession fears. Yield on a 10y JGB has crossed 1.50% level and on a 30y it is above 3% and reached new all time high.

CHF

SNB total sight deposits for the week ending May 16 came in at CHF443.2bn vs CHF453.2bn the previous week. This is one of the biggest moves in the past six weeks but it only moves deposits from the top of the range back into the middle of the range for deposits.​

 

[katetrades]

Forex Major Currencies Outlook (Jun 2 – Jun 6)

ECB and BoC meetings, NFP from the US and employment data from Canada coupled with inflation data from the Eurozone and Switzerland, Q1 GDP from Australia and Switzerland and PMI data from the US and China will highlight this jam packed week ahead of us.

USD

On Friday May 23 Trump threatened Eurozone with tariffs of up to 50% that will be imposed on June 1. Over the weekend he had a change of heart and delayed implementation until July 8 which caused risk on sentiment. During the week US Federal Court for International Trade blocked Trump’s “Liberation Day” tariffs from going into full effect. They have unanimously ruled out that president has overstepped its authority by imposing tariffs. This will lead to increased uncertainty in the markets. At the end of the week President Trump increased tariffs on steel to 50%.

Elon Musk has unceremoniously left Trump administration. He thanked president for the opportunity to be a part of his administration. May Conference Board consumer sentiment surged to 98 from 85.7 in April while expectations were for an 87 print.

May PCE saw headline number decline to 2.1% y/y from 2.3% y/y in April with a 0.1% m/m increase. Core PCE declined to 2.5% y/y as expected from 2.7% y/y the previous month with also a 0.1% m/m increase. Inflation is subsiding and declining as planned. Personal income had another strong increase of 0.8% m/m while personal consumption printed an increase of 0.1% m/m.

The yield on a 10y Treasury started the week at 4.51%, rose to 4.54% and finished the week at around 4.41%. The yield on 2y Treasury started the week at 4%, rose to 4.05% and finished the week at around 3.89% while the yield on a 30y Treasury started the week at 5.04% level and finished the week at around 4.92%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week unchanged at 52bp. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 5%, while probability of a no cuts is around 95%. September is now the first month with greater than 50% probability of a rate cut.

This week we will have ISM PMI data as well as NFP on Friday. Headline NFP number is expected to come at 130k with unemployment rate staying at 4.2%.

Important news for USD:

Monday:​

• ISM Manufacturing PMI​

Wednesday:​

• ISM Services PMI​

Friday:​

• NFP​
• Unemployment Rate​

EUR

Preliminary French inflation for the month of April saw CPI rise 0.7% y/y vs 0.9% y/y as expected and tick down from 0.8% y/y in March. Services inflation also declined and it is now almost at a 2% level with a 2.1% y/y print. Spain inflation came in at 1.9% y/y vs 2% y/y as expected while Italy also posted 1.9% y/y. German inflation print was unchanged at 2.1% y/y.

ECB policymaker Holzmann, the most hawkish member, stated that ECB should delay further rate cuts until at least September. He added that cutting rates at June and July meetings will be very risky stating US-EU trade war as the main source of uncertainty.

This week we will have preliminary May inflation and ECB meeting. Markets are leaning towards 25bp rate cut given that inflation is coming down more than expected.

Important news for EUR:

Tuesday:​

• CPI​

Thursday:​

• ECB Interest Rate Decision​

GBP

BoE Taylor spoke with Financial Times and stated that he sees more risks piling onto downside scenario as trade war will be negative for the growth. He clarified that higher inflation seen in the last print is not due to supply and demand pressures, but it is rather due to one-time tax and administered price changes. If majority of BoE views it like this it opens the door for additional rate cuts.

AUD

Q1 CAPEX data saw a decline of -0.1% q/q vs 0.5% q/q as expected. Private investment fell for the second quarter in a row after printing -0.2% q/q in Q4 of 2024. Building CAPEX was positive for the quarter but it was overshadowed by a big decline in plant/machinery CAPEX. April retail sales missed expectations and declined on the month which coupled with slower construction activity as indicated by declining building permits took its toll on AUD which weakened significantly going into the weekend.

This week we will have Q1 GDP from Australia and official PMI data from China.

Important news for AUD:

Wednesday:​

• GDP​

Saturday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

NZD

RBNZ delivered a 25bp rate cut as was expected thus brining the Official Cash Rate (OCR) to 3.25% making it a 225bp cuts in this rate cutting cycle. The statement shows satisfaction with inflation coming down to the targeted band of 1-3%. Prevailing conditions are in line with bringing inflation to mid-point of that range. New Zealand economy is recovering but recent developments in the international economy, trade wars, are expected to slow down that recovery. They would also reduce medium-term inflation pressures. The Committee debated whether to cut rates by 25bp or leave them unchanged. In the end, a cut won with a majority of 5 to 1 vote. Committee also stated that the full effect of cuts that started in August of 2024 is not yet reflected in the economy. US tariffs will dampen demand for New Zealand exports.

Projections see annual CPI increasing to 2.7% in Q3 2025 and then returning near the 2% target midpoint from 2026. OCR is seen at 3.12% in September of 2025, down from 3.23% previously with OCR reaching the low of 2.87% in June of 2026 while 3.1% was seen previously. RBNZ Governor Hawkesby assessed the decision to hold vote on rates as a healthy sign adding that it is not unusual to see it at turning points. He stated that rates are now in neutral zone and it is now more about feeling when setting the policy. Markets were hoping for more and faster rate cuts and with RBNZ clearly slowing the pace and sounding more neutral than dovish NZD strengthened.

Business confidence plunged in May to 36.6 from 49.3 in April. Declines were seen across major categories such as profit expectations, investment and employment intentions, own activity outlook, with notable drops in GDP and employment measures. Ease of credit as well as residential and commercial construction also plunged. Wage expectations also declined coupled with pricing intentions but inflation expectations 1 year out rose to 2.71% from 2.65%.

CAD

Q1 GDP data showed economy growing by 2.2% annualized vs 1.7% annualized as expected. This comes after a 2.6% annualized growth in Q4 of 2024. The report shows that exports were the driving force behind growth. We got a March monthly reading that showed economy grow 0.1% m/m.

This week we will have BoC meeting and employment data. BoC has decided to pause with rate cutting cycle so we should see no change to rate at this meeting.

Important news for CAD:

Wednesday:​

• BoC Interest Rate Decision​

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

May inflation report saw headline number tick down to 3.4% y/y as expected from 3.5% y/y in April. On the other hand, core numbers came in hotter than expected. Ex fresh food component jumped to 3.6% y/y from 3.4% y/y the previous month and thus reached highest level since January of 2023. Ex fresh food, energy component, so-called core core, rose to 3.3% y/y from 3.1% y/y in April moving to the highest level since January of 2024. April retail sales improved 0.5% m/m and 3.3% y/y from -1.2% m/m and 3.1% y/y in March. Industrial production declined in April by 0.9% m/m. BoJ is faced with a tough decision as inflation is running higher pushing them to raise rates but there are some weaknesses in economic activity as seen in industrial production and overall GDP that should push them toward more accommodative monetary policy.

CHF

SNB total sight deposits for the week ending May 23 came in at CHF443.4bn vs CHF443.2bn the previous week. Swiss economy minister Parmelin stated that they are hoping that trade talks with the US will produce results by beginning of July. SNB Governor Schlagel stated that negative interest rates cannot be ruled out in the coming months.

This week we will have Q1 GDP and May inflation data.

Important news for CHF:

Monday:​

• GDP​

Tuesday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Jun 9 – Jun 13)

Inflation from the US and China, employment from the UK, final Q1 GDP from Japan and trade balance data from China will highlight the week ahead of us.

USD

ISM manufacturing PMI in May printed 48.5 vs 49.5 estimate and down from 48.7 in April. This is fourth consecutive month of declining numbers as the reading is slowly moving further down into contraction. Digging into details we see a better looking picture as production, new orders and employment all improved on the month. Prices paid component declined slightly. Big drops were seen in inventories, new export orders and imports.

OECD has reduced global GDP to 2.9% for 2025 and 2026 from 3.1% and 3% respectively citing trade barriers and tighter monetary conditions as main reasons. Inflation outlook for the world was revised down to 3.6% from 3.8% previously but for the US it has been revised up to 3.2% from 2.8% previously.

US has extended tariff pause on some goods from China through August 31. Trump and Xi held a phone call meeting during the week and agreed to start a new round of trade talks. Meetings are expected to start next week. We also got a breakup between Trump and Musk. It got ugly with Musk saying Trump tariffs will cause recession in latter part of 2025 with Trump saying Musk “disappointed”. Tesla shares were down double digits after the war of words on social media. The rhetoric died down as the week came to an end and there was a kind of truce established between the parties.

ISM services printed 49.9 in May vs 52 as expected and down from 51.6 in April. Although it is as close as 50 as possible this is the first time services fell below 50 since June of last year. Positives include employment returning to expansion. Negatives are big drop into contraction for new orders (first negative reading in a year), increase in inflationary pressures as suggested by prices paid component. Business activity declined hard but managed to pull our exactly 50 print.

April trade balance showed deficit shrinking sharply to -$61.6bn from -$138.3bn in March. Exports rose by 3% while imports plunged -16.3% as tariffs stepped in and all import front running was done in the previous month.

NFP May report sawed mixed signals. Headline number came in at 139k vs 130k as expected but previous month’s number was revised down (147k vs 177k). The unemployment rate remained unchanged at 4.2% but when calculated to the third decimal it printed 4.244%, almost 4.3% and up from 4.1872% in April. Participation rate dropped to 62.4% from 62.6% the previous month. Wages continued to rise coming in at 0.4% m/m vs 0.3% m/m as expected and 3.9% y/y vs 3.7% y/y as expected. Healthcare added the most jobs, 62k, followed by 48k in leisure and hospitality. Federal government employment fell by 21k jobs. Overall, this should push rate cuts further into the future.

The yield on a 10y Treasury started the week at 4.40%, rose to 4.52% and finished the week at around 4.51%. The yield on 2y Treasury started the week at 3.91%, rose to 4.05% and finished the week at around 4.04%. Spread between 2y and 10y Treasuries started the week at 50bp and finished the week at 47bp as curve bear flattened. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 1%, while probability of a no cuts is around 99%. September is now the first month with greater than 50% probability of a rate cut. Gold has again reached $3400 during the week while S&P touched 6000. Silver has crossed $36.

This week we will have May inflation data, expected to show a slight increase.

Important news for USD:

Wednesday:​

• CPI​

EUR

Final manufacturing PMI for the month of May was unchanged from preliminary reading at 49.4 but improved from 49 in April. The report showed production increasing across all major economies, although overall PMI number showed a tick down in Germany while it improved nicely in France. Final services were lifted up to 49.7 from 48.9 a preliminary reported getting so closer to the expansion after printing 50.1 in April. French and Italian readings were revised up while German and Spanish readings were revised down. Positive revisions helped composite stay in expansion with a 50.2 print. It has been in expansion for every month of 2025.

Preliminary May inflation data for the Eurozone saw headline number drop to 1.9% y/y from 2.2% y/y in April while a 2% y/y print was expected. Monthly reading showed no change in inflation. Core reading dropped to 2.3% y/y from 2.7% y/y the previous month while markets were bracing for a 2.5% y/y print. Services inflation dropped again after rising in April and is now sitting at 3.2%. This is the first time inflation printed below the 2% target since September and it cemented a 25bp rate cut. Final Q1 GDP number was revised up to 0.6% q/q and 1.5% y/y from 0.4% q/q and 1.2% y/y as seen in second estimate.

ECB has cut interest rate by 25bp as was widely expected and brought it to 2%. This is eighth cut rate in a year and it is now at the lowest level since December of 2022. Inflation is coming down and according to most measures it will settle down around targeted 2% level. ECB will not pre-commit to a particular rate path and will instead keep data-dependent, meeting-by-meeting approach. New inflation projections see headline inflation averaging 2% in 2025, 1.6% in 2026 and 2% in 2027. Core inflation is seen averaging 2.4% in 2025 and 1.9% in 2026 and 2027. Real GDP is seen averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027.

ECB president Lagarde stated at the press conference that she will stay at the helm of ECB till the end of her mandate. She added that risks to growth are tilted to the downside and that services sector is slowing. She clarified that ECB is getting closer to the end of the cutting cycle but added that she is not confirming a pause. We could see a pause in July and then continuation of cuts in Q4 or in September at earliest. There was a virtually unanimous decision on rate cuts, only one dissented and it was the most hawkish member Holzmann. He wanted to keep rates unchanged.

GBP

May final manufacturing PMI improved significantly printing 46.4 vs 45.1 as preliminary reported and up from 45.4 in April. Output and new orders rose for the second month in a row while input and output prices both declined. The latter will satisfy BoE. Services were revised up to 50.9 as there were increases in business activity and business optimism while new orders and employment continued to falter. Positive revisions helped push composite back into expansion with a 50.3 print vs 49.4 as preliminary reported and 48.5 in April.

BoE MPC Catherine Mann, the most hawkish member, stated that cutting interest rates at the same time as shrinking the balance sheet creates tension. She added that she will consider the balance sheet reduction when deciding interest rates in the future. All of this can be interpreted as Mann leaning more dovish in the future voting.

This week we will have employment data.

Important news for GBP:

Tuesday:​

• Payrolls Change​
• Unemployment Rate​

AUD

RBA meeting minutes showed that board has debated whether to keep rates unchanged, cut them by 25bp or cut them by 50bp. In the end they opted for a 25bp as the case for it was the strongest and it would make policy predictable and cautious. Members have warned that inflation is still not in the middle of their targeted 1-3% range. The policy remains restrictive as board members judged it is still premature to move it into expansion. Australia has decided to increase minimum wages by 3.5% starting July 1 thus covering the current inflation level of 2.4%.

Q1 GDP saw economy grow by 0.2% q/q and 1.3% y/y vs 0.4% q/q and 1.5% y/y as expected. Growth in Q4 was 0.6% q/q and also 1.3% y/y. A decline was seen in consumption growth which printed 0.2% compared to 0.5% in the previous quarter with household consumption growing 0.4%. There was no growth in government consumption which comes after nine consecutive quarters of growth. Household savings rate jumped to 5.2% from 3.9% in Q4. The report gives RBA permission to deliver another 25bp rate cut.

Official PMI data from China for the month of May saw improvement in manufacturing as it printed 49.5 vs 49 in April. Production returned to expansion while new orders printed 49.8, very close to expansion with a nice rebound compared to the previous month. Employment component also improved. On the non-manufacturing side, there was a tick down as the print showed 50.3 vs 50.4 in April. New orders improved but remained deep in contraction while business expectations remain very healthy. Composite PMI was lifted to 50.4 from 50.2 the previous month.

Caixin manufacturing surprised to the downside and printed 48.3 after 50.4 in April. This is the lowest reading since September of 2022 and first time the reading fell in contraction since September of 2024. The report showed production and new orders declining with new export orders and employment dropping at a faster pace. Both input and output prices continued to decline and China is already struggling with deflation. One bright thing is that business confidence slightly improved. Caixin services improved to 51.1 from 50.7, with decrease in foreign demand, but increases in overall demand and business confidence. However, it was not enough to keep composite in expansion as it printed 49.9 making it the first time it printed below 50 since December of 2022.

This week we will have May inflation and trade balance data from China. The latter will show us how well China is adapting to tariffs.​

Important news for AUD:

Monday:​

• CPI (China)​
• Trade Balance (China)​

NZD

First dairy action in June saw GDT index print -1.6% as butter milk prices dropped by -6.1% with cheddar and whole milk powder prices also declining. Mozzarella prices showed the biggest increase.

CAD

BoC has kept rates unchanged at 2.75% as expected by the majority of investors. The accompanying statement shows high uncertainty caused by tariffs and global trade developments. Q1 GDP came in slightly stronger than bank expected but the labour markets has weakened and overall economy is expected to be “considerably weaker” in Q2. On forward guidance ”Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve.“

BoC Governor Macklem clarified that there was a clear consensus for no change. He clarified that there was no such clarity in regards to future. “On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued US tariffs and uncertainty, and cost pressures on inflation are contained.“ He added that bank will closely monitor measures of underlying inflation and next two CPI reports will be watched with special attention.

Employment report for May saw economy add 8.8k jobs vs -12.5k as expected. The unemployment rate ticked up to 7% reaching the highest level since August of 2021 while participation rate remained at 65.3%. Wage growth was unchanged at 3.5% y/y. Composition of jobs was encouraging as economy added 57.7k full-time jobs while it lost 48.8k part-time jobs. BoC is expected to cut rates as early as the next meeting and this report could nudge them in that direction.

JPY

Q1 CAPEX spending showed a great improvement as it grew by 6.4% y/y compared to declining by 0.2% y/y in the previous quarter. This data will go into final GDP print next week and may even help economy grow in the first quarter. Final manufacturing PMI for the month of May improved to 49.4 from 49 as preliminary reported and up from 48.7 in April. The report shows continued declines in output and new orders but the pace has slowed down. Business optimism has increased as firms see global recovery which will further add to stabilization in manufacturing sector. Final services saw improvement to 51 from 50.8 as preliminary reported but still down from 52.4 in April. The report showed slower growth in output, new orders and employment while input costs continued to increase. Revisions managed to pull composite out of contraction as preliminary reported as final reading showed 50.2 print.

BoJ Governor Ueda spoke in the Parliament and stated that economy is recovering modestly. Comment that garnered most attention was that bank will continue to raise interest rates if both economy and prices move in line with forecasts, meaning he will act only if both turn up higher. He added that currently there is no need to change baseline view of the economy that was made on May 1. Average wages rose by 2.3% y/y in April but when inflation is accounted real wages came in at -1.8% y/y. This is the fourth consecutive month of falling real wages.

This week we will have final Q1 GDP print expected to show positive revision on the back of strong CAPEX.​

Important news for JPY:

Monday:​

• GDP​

CHF

Swiss economy grew by 0.5% q/q and 2% y/y improving from 0.3% q/q and 1.6% y/y growth as seen in the previous quarter. Exports were the biggest contributor due to the front-running of tariffs. May inflation figures saw headline number fall into negative territory with a -0.1% y/y print. This is the first negative print since March of 2021. Strong Swissy, due to global trade uncertainties, is pushing inflation down and has managed to create deflation in the economy. Core number ticked down to 0.5% y/y from 0.6% y/y the previous month. SNB board member Tschudin brushed off the the report stating that it is only one data point and emphasized that they are focused on the medium term. SNB total sight deposits for the week ending May 30 came in at CHF444.9bn vs CHF443.4bn the previous week.​

 

[katetrades]

Forex Major Currencies Outlook (Jun 16 – Jun 20)

Central banks will dominate the week with Fed, BoE, BoJ and SNB all have their meetings. Additionally, we will get inflation data from the UK, employment data from Australia, economic activity data from China and Q1 GDP from New Zealand in this massively busy week.

USD

New York Fed published a report showing that 1-year inflation expectations sit now at 3.2% compared to 3.6% in April. World bank cut world GDP by 0.4pp now seeing it at 2.3%. US GDP was cut to 1.4% from 2.3% in January and for 2026 it is cut to 1.6% from 2%. GDP projection has been lowered for 70% of economies with China’s staying unchanged at 4.5%.

Latest round of US-China trade talks concluded with pledge from both countries to enforce Geneva protocol. Additionally US has pledged to ease some export controls such as on jet engines and ethane as well as allow students from China to attend US colleges and universities while China agreed to speed up shipments of rare earth minerals to the US. China has given US a six-month license for rare earth exports indicating that it will use those exports in future negotiations. Reports show that US and Mexico are getting close to striking a deal that would reduce steel tariffs.

Treasury Secretary Bessent stated that tariff deadline could be rolled for countries that negotiate in good faith. He added that Trump is highly likely to push back the deadline date, currently July 9, for top trading partners. This just means more uncertainty around tariffs which could push markets into paying little attention to tariff news in the future.

May CPI report came in weaker than expected. Headline number printed 2.4% y/y, up from 2.3% y/y in April, but lower than 2.5% y/y as expected. Monthly reading printed 0.1% increase (0.081% when unrounded). Annualized it is printing 0.9%, more than double less than the target! Core reading stayed at 2.8% y/y for the third straight month while markets expected a 2.9% y/y print. Monthly it also printed 0.1% increase (0.130% unrounded). Annualized core is printing 1.57%. Core services ex shelter rose 0.2% m/m same as services ex energy. Shelter rose 0.3% m/m and 3.9% y/y. Super core rose 0.0305% m/m, which amounts to 0.37% annualized, and 1.853% y/y. Chances of a Fed rate cut in the coming months increased on the back of this report.

Tensions in the Middle East were growing as US-Iran talks are not producing desired results. Reports of US evacuating all of its non-essential staff from the embassy in Baghdad as well as military families from neighbouring Gulf states. Oil has jumped on the news with WTI smashing through $65 resistance and reaching as high as $68. Then on Friday 13, what an irony, Israel hit Iran nuclear facilities with air strikes. Several high ranking military officials as well as scientists were killed. Oil had another leg higher as it reached $75.

The yield on a 10y Treasury started the week at 4.51%, rose to 4.52% and finished the week at around 4.41%. The yield on 2y Treasury started the week at 4.04%, rose to 4.05% and finished the week at around 3.96%. Spread between 2y and 10y Treasuries started the week at 47bp and finished the week at 45bp as curve proceeded to flatten. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 3%, while probability of a no cuts is around 97%. September is the first month with greater than 50% probability of a rate cut. Bitcoin has climbed above $110k during the week but after the Israeli air strikes it plummeted towards $100k. Air strikes caused oil to go as high as $75 while gold crossed $3400.

This week we will have retail sales data as well as Fed meeting. No change to rate is expected. We will get new SEP (Summary of Economic Projections) which will give us clearer picture of how many cuts Fed plans for this week and what is their outlook for growth, inflation and employment. After a benign May inflation report we could see hear satisfaction and some dovish comments from Powell.

Important news for USD:

Tuesday:​

• Retail Sales​

Wednesday:​

• Fed Interest Rate Decision​

EUR

EUR enjoyed a great week as it gained against all major currencies with EURUSD crossing the 1.15 level that has proved to be a tough resistance. The pair tried to break it several times in the past month but finally managed to do it on June 12. Ultimately the pair reached the 1.16 level as well but then return below it after Israeli attacks. Final May inflation numbers came in unchanged for Germany and France at 2.1% y/y and 0.7% y/y respectively while Spain was revised up to 2% y/y from 1.9% y/y as preliminary reported.

ECB member of the Governing Council Isabel Schnabell stated that the bank is getting to the end of cutting cycle. She added that despite trade tensions global growth outlook remains stable and that medium-term inflation stabilizes at target. Core inflation remains elevated but is on a good path to coming down. Financing conditions are no longer restrictive.

GBP

Employment report showed weakness in labour market. Payrolls change for the month of May showed 109k jobs lost for the biggest monthly loss in five years (May 2020, middle of the Covid pandemic). April unemployment rate ticked up to 4.6% while wages eased to 5.3% 3m/y vs 5.5% 3m/y for average weekly earnings and 5.2% 3m/y vs 5.3% 3m/y for ex bonus. ONS added that firms may not be replacing workers that left. Probability of next BoE rate cut moved to August and GBP suffered.

April GDP printed -0.3% m/m vs -0.1% m/m as expected. Services declined by 0.4% m/m after rising 0.4% m/m in March. The report shows that nine out of fourteen subsectors experienced declines. Construction sector was a bright spot as it rose 0.9% m/m. Overall, UK economy started Q2 on a weak foot as tariffs impacted auto industry as well as trade.

This week we will have inflation data and BoE meeting. There will be no change in rates but due to the disappointing jobs report we can expect dovish rhetoric by the bank with even a 6-3 vote.

Important news for GBP:

Wednesday:​

• CPI​

Thursday:​

• BoE Interest Rate Decision​

AUD

China May CPI showed further declines as headline number printed -0.1% y/y for the third consecutive month. Food inflation remained the biggest drag as it printed -0.4% y/y while core inflation ticked up to 0.6% y/y from 0.5% y/y in April. PPI also continued to decline but it plunged -3.3% y/y. It has been in deflation for 32 months, since September of 2022! Trade balance data saw surplus increasing to $103.2bn from $96.1bn in April. Exports increased by 4.8% y/y while imports shrank by 3.4% y/y. Falling imports increase concerns about weak domestic demand. Trade surplus with US continued to decline as exports to the US fell by 34.5% y/y in May, after falling 21% in April. Exports to the US could increase in coming months provided that relationship between countries improves.

This week we will have employment data from Australia as well as economic activity data from China.

Important news for AUD:

Monday:​

• Retail Sales (China)​
• Industrial Production (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

Electronic retail sales, covering almost 70% of total retail sales, printed -0.2% m/m and 0.9% y/y in the month of May. Israeli attacks and increased geopolitical concerns caused risk off sentiment in the markets and Kiwi suffered, declining on the week against the majors.

This week we will get Q1 GDP data.

Important news for NZD:

Thursday:​

• GDP​

CAD

Building permits fell again in April by -6.6% y/y after declining -5.3% y/y in March. Final manufacturing sales and wholesale trade declined by -2.8% m/m and -2.3% m/m respectively. CAD managed to gain some ground on the back of rising oil prices.

JPY

Final Q1 GDP was revised up, but still came in negative (-0.2% vs -0.7% annualized as preliminary reported). When looking q/q GDP came in flat after -0.2% preliminary print. Private consumption was revised up (0.1% vs 0%) while surprisingly after a strong reading capex was revised down (1.1% vs 1.4%).

This week we will have BoJ meeting. There will be no change in rate but bank is expected to announce that it will reduce the pace of quantitative tightening. BoJ has been buying JPY400bn less bonds per quarter and that number is expected to be reduced to somewhere between JPY200-375bn.

Important news for JPY:

Tuesday:​

• BoJ Interest Rate Decision​

CHF

SNB total sight deposits for the week ending June 6 came in at CHF438.1bn vs CHF444.9bn the previous week. Just a small move as SNB prepares to deliver a rate cut next week and influence Swissy strength in that way.

This week we will have SNB meeting. Markets are pricing in a 25bp rate cut with some parts going as far as a 50bp rate cut.​

Important news for CHF:

Thursday:​

• SNB Interest Rate Decision​

 

[katetrades]

Forex Major Currencies Outlook (Jun 23 – Jun 27)

Preliminary June PMI data from the Eurozone and the UK as well as inflation data from the US and Canada will highlight the week from the economic data standpoint. Trump posts, trade policy, potential further escalation in the Middle East, Powell’s testimony in front of the Congress as well as quarter end rebalancing will give markets plenty of headaches.

USD

Strength of US consumer showed some disappointing signs as headline number printed -0.9% m/m vs -0.7% m/m after a -0.1% m/m print in April thus falling for the second month in a row. However, control group, a better prediction of consumer strength, rose 0.4% m/m vs 0.3% m/m as expected and up from -0.1% m/m the previous month. Digging into the details we see that biggest increases were seen in miscellaneous (2.9%) as well as clothing and accessories and non-store (online) retail. The biggest decreases were seen in autos (-3.5%), building materials (-2.7%) as well as food services and drinking places. Food services and drinking places are good barometer of consumer discretionary spending and them going down is a troubling sign. Still, we cannot extrapolate from one reading.

Fed has left federal interest rate in the range of 4.25-4.50% as was widely expected. The decision was unanimous. The statement shows that recent indicators suggest continuation in expansion of economic activity with solid labor market conditions and low unemployment rate. Inflation, however, remains somewhat elevated. Uncertainty about the economic outlook has diminished but remains elevated. The committee is attentive to risks on both sides of its dual mandate and will continue to monitor situation, remain data-dependent and make decisions meeting-by-meeting.

Dot plot shows two rate cuts for this year with rates expected to finish year at 3.9%. Rates have been moved higher for the coming years and now are seen at 3.6% in 20246 were 3.4% in March and 3.4% in 2027, were 3.1% in March. Longer term neutral rate remained at 3%. Summary of Economic Projections shows lower GDP projection for 2025 (1.4% vs 1.7% in March) and 2026 (1.6% vs 1.8% in March). The unemployment rate is now seen at 4.5% for 2025 and 2026 vs 4.4% and 4.3% respectively in March. PCE inflation was revised higher to 3% for 2025, 2.4% for 2026 and 2.1% for 2027, returning to 2% target in the long run.

Chariman Powell stated during the press conference that Fed is expecting a meaningful increase in inflation in the coming months due to tariffs and they are waiting to see the effects of price increases. On the labour market he stated that it is not “crying out for a rate cut” and that wages are coming down and as such are not the source of inflation. He assessed monetary policy as appropriate and in a good place given the resilient economy and added that rate cuts will be in order once the data confirms. Powell did not really disclose anything new, although on the edge it could be said that he sounded hawkish, given that he did not express any notable concerns.

The yield on a 10y Treasury started the week at 4.41%, rose to 4.46% and finished the week at around 4.38%. The yield on 2y Treasury started the week at 3.96%, rose to 4% and finished the week at around 3.90%. Spread between 2y and 10y Treasuries started the week at 46bp and finished the week at 49bp as curve steepened. FedWatchTool sees the probability of a 25bp rate cut at July meeting at around 10%, while probability of a no cuts is around 90%. September remains the first month with greater than 50% probability of a rate cut.

This week we will have Fed Chair Powell testimony in front of the Congress as well as Fed’s preferred inflation measure PCE.

Important news for USD:

Tuesday-Wednesday:​

• Powell Testimony​

Friday:​

• PCE​

EUR

ECB policymaker, head of Bundesbank, Joachim Nagel stated that it would not be wise to signal either a rate cut or a pause at the moment. He thinks that bank must remain flexible. Incoming data suggests that mission is accomplished but that bank needs to have all options open when it comes to interest rates. Q1 wages costs have eased to 3.4% y/y from 4.1% y/y in Q4 of 2024. Decline in wage costs means increased profit margins for firms and it lowers the probability of demand-pull inflation. First data point in June, ZEW survey, showed big jumps in expectations for both German economy and Eurozone economy. Final CPI for the month of May was unchanged at 1.9% y/y for headline and 2.4% y/y for core.

This week we will have preliminary June PMI data expected to show further improvement and return to expansion.

Important news for EUR:

Monday:​

• Manufacturing PMI (Eurozone, Germany, France)​
• Services PMI (Eurozone, Germany, France)​
• Composite PMI (Eurozone, Germany, France)​

GBP

May inflation data saw both numbers ease as expected. Headline print came in at 3.4% y/y vs 3.5% y/y in April while core number printed 3.5% y/y vs 3.8% y/y the previous month. Services inflation came down to 4.7% y/y from 5.4% y/y seen in April. Last month’s numbers had some quirks, for example airline fares experienced a huge jump due to Easter holiday, but now inflation is slowly returning to its downward trend.

BoE has left rate unchanged at 4.25% as widely expect but, as we suspected, vote was showing 6-3 instead of 7-2 as markets expected. Dhingra, Taylor and Ramsden voted for a 25bp rate cut. The statement shows that GDP remains weak and labour market continues to loosen. Risks to inflation are now seen as two-sided. Members emphasized importance of gradual and careful approach to withdrawal of policy restraints and added that “Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.“ Markets are still pricing August cut.

Retail sales disappointed in May falling 2.7% m/m after rising 1.2% m/m in April and declining 1.3% y/y. The biggest drops were seen in sales of household goods and food followed by a drop in clothing sales.

This week we will have preliminary June PMI data expected to show some improvements.

Important news for GBP:

Monday:​

• Manufacturing PMI​
• Services PMI​
• Composite PMI​

AUD

May employment report saw economy lose 2.5k jobs vs add 25k jobs as was expected. The unemployment rate remained at 4.1% while participation rate ticked down to 67%. Structure of jobs added is much more favorable as it sees 38.7k full-time jobs added while part-time jobs saw a loss of 41.1k.

Economic data from China for the month of May showed a big increase in retail sales. They have risen 6.4% y/y after a 5.1% y/y increase in April thus making it the biggest increase since December of 2023. The details show fastest growth in household appliances as well as in communication appliances. Industrial production slowed growth as it printed, still very healthy, 5.8% y/y after a 6.1% print the previous month. Hi-tech production experienced stronger growth while low-end manufacturing shrank.

NZD

Consumer confidence for Q2 increased to 91.2 from 89.2 in Q1. Reminder that 100 is seen as the dividing line between optimism and pessimism so this reading can be seen more as carving a bottom rather than a meaningful improvement. Q1 GDP saw a 0.8% q/q growth vs 0.7% q/q as expected and up from 0.5% q/q in Q4 of 2024 as well as -0.7% y/y vs -1.3% y/y in the previous quarter.

CAD

Housing starts in May brought strong results as it printed 279.5k vs 245k as expected with positive revisions to April reading. April retail sales data showed an increase of 0.3% m/m vs 0.5% m/m as expected with ex autos category printing -0.3% m/m vs 0.2% m/m as expected. Advanced reading for May showed retail sales declining further 1.1% m/m which raises concerns about potential nosedive of Canadian consumer.

This week we will have inflation data expected to show decline.

Important news for CAD:

Tuesday:​

• CPI​

JPY

BoJ has left the rate unchanged at 25bp, as was widely expected, with a unanimous vote. They will start tapering bond purchases right away at the tune of JPY400bn per quarter until Q1 of 2026. From Q2 of 2026 they will lower purchases by JPY200bn and then keep it at JPY2tn from Q1 of 2027. The decision was made with a 8-1 vote as one member wanted market to determine long-term rates. Economy has recovered moderately but uncertainties related to trade tensions around the world will cause weakness in other economies which in turn will dampen economic recovery in Japan. Inflation is expected to remain sluggish and come down due to weaker demand expected caused by the economic slowdown.

BoJ Governor Ueda stated that their easy monetary policy is helping with economic recovery and that they will continue raising rates if economy and prices improve. He added that there both upside and downside risks to prices and that they are vigilantly monitoring data when deciding about next policy moves. Ueda clarified that decision to taper bond buying is made with intent to prevent excessive market volatility that would negatively impact economy. Overall, the statement and press conference emphasize that BoJ will not rush with rate hikes and will wait until they get satisfying data and economic conditions.

Prime Minister Ishiba stated that cash handouts are the cleanest and fastest way to reach citizens and help them with high prices. He added that he will continue to work intensely with US on reaching a trade deal. The deal has to benefit both countries and defend Japan’s national interest.

May inflation data showed headline number tick down to 3.5% y/y from 3.6% y/y in April on the back of lower food prices. Government has released its rice reserves which helped bring prices down. However, core measures paint a different story. CPI ex fresh food rose to 3.7% y/y from 3.5% y/y the previous month, highest reading since December of 2023, with markets expecting a 3.6% y/y print while ex fresh food, energy rose to 3.3% y/y from 3% y/y in April and more than 3.2% y/y as expected. Inflation remains well above the target but BoJ will not react until there is more clarity on trade relationship with the US.

CHF

SNB total sight deposits for the week ending June 16 came in at CHF434.8bn vs CHF438.1bn the previous week. This is the second consecutive week of declining deposits as they are moving down into the well-established range.

SNB has delivered a widely expected 25bp rate cut thus bringing the rate down to 0%. They have emphasized uncertainties for both Swiss and global economies and reiterated their readiness to intervene in the FX market if necessary. New projections see GDP for 2025 unchanged at 1-1.5%. That same range is seen for 2026 as well but it was seen previously at 1.5%. Inflation has been revised down to 0.2% from 0.4% for 2025, to 0.5% from 0.8% for 2026 and to 0.7% also from 0.8% for 2027. Chairman Schlegel stated that they are aware of undesirable effects of negative interest rates but they have been an important monetary tool in the past. Not fully opening the door for negative rates but the probability of them being reintroduced has increased.​