Market Update: Swiss CPI and Impacts

In today’s session, the Swiss CPI report took center stage. The data, unfortunately, was way off, which had a negative impact on the Swiss franc. However, it seems unlikely that this will prompt any shifts for the Swiss National Bank (SNB), especially since they’ve already ended their easing practices. The SNB would need something substantial to reconsider a return to negative interest rate policy.

Swiss National Bank Chairman Schlegel shared expectations of a slight increase in inflation over the next few quarters. Their latest forecast suggests inflation will average around 0.4% in the fourth quarter.

We also received the final manufacturing PMIs from key eurozone economies and the UK. Interestingly, all prices came in above the preliminary figures, but since the market usually focuses on initial data, overall expectations remain unchanged.

Several speakers from the European Central Bank (ECB) reiterated their consistent viewpoint: they expect inflation to stay near target in the medium term, and minor short-term fluctuations don’t necessitate a policy change. Some members hinted that the next move could even involve a rate hike.

On another note, Mr. Millan from the Fed mentioned that he perceives the neutral rate to be significantly lower than the current policy rate. He plans to pay less attention to financial conditions in making policy decisions; interestingly, he indicated being quite content with this stance. As of now, I believe there are just 11 voting members in the Fed.

In the markets, the US dollar saw some gains, although not against all major currencies. It didn’t hit new highs against the pound, Australian dollar, New Zealand dollar, or Japanese yen. The most notable increase was against the Swiss franc, likely influenced by the disappointing CPI report.

Although the UK market remained relatively flat, stock markets overall showed an upward trend, with positive sentiments prevailing. A noteworthy movement was seen in Germany’s DAX, especially following positive news surrounding auto stocks over the weekend.

Crude oil prices initially surged due to OPEC’s suspension announcements, but have since lost those gains, settling slightly negative. Gold and silver also saw minor increases, though they’re mostly consolidating as they prepare for the next significant move.

Lastly, in the bond market, yields have been climbing as the recent US-China agreement and Powell’s hawkish outlook continue to influence interest rates.