Swiss strengthBy Vincent-Frédéric Mivelaz
While inflation in the EU slowed in April, in Switzerland it held steady at 0.80%, above its long-term average of 0.50%. Meanwhile, the CHF has softened against EUR and USD, which should boost exporters’ results going forward. Growth should excel, and boost the Swiss Market Index, which has languished in negative numbers since the beginning of the year (-4.61%). Unlike EUR/CHF sideways trading below 1.20, USD/CHF’s steep rise above the psychological barrier of 1.00 continues, heading to 1.0045 in the short-term.
In real terms, Swiss inflation remained lower, due to a deceleration in clothing, hotels and restaurants and recreation. With an April take-off in manufacturing (manufacturing PMI: 63.6, prior: 60.30) and a continued decline in unemployment, estimated at 2.70%, the Swiss economy remains on track for a strong step up in 2018, with GDP growth expected above 2% for Q1, boosted by strong export numbers since February.
Trump hogs the spotlightBy Arnaud Masset
President Donald Trump is stealing financial markets’ attention. Today, Tuesday, at 2 pm USA Eastern Time (20.00 Central European Time), he will announce his final decision on the Iranian nuclear treaty. So markets are watching and waiting. The greenback extended gains against commodity currencies such as the CAD, AUD and the NZD (-0.75%, -0.55% and -0.25%) , while safe-haven ones, such as the JPY and CHF (+0.10% and +0.01%), held ground. The Aussie is suffering ahead of the release of the federal budget, in which the government is expected to announce details of its much-awaited tax break.
It is of course difficult to predict the unpredictable US president. Nevertheless, the risk is mostly skewed to the upside for the buck, as there is more chance that he’ll withdrawal than remain. In case he decides to extend the deadline, it would have a rather neutral impact on current risk sentiment.
Crude oil is volatile. After hitting $70.84 on Monday, West Texas Intermediate erased gains and slid back to $69.84, down 1.25% on the day. Similarly, Brent crude fell 0.90%, down to $75.50 as investors brace for a stormy trading session.