Bowman Confirmed By Senate To Be Fed Vice Chair For Supervision

Central Bank

Political

Summary:

Federal Reserve Governor Michelle Bowman was confirmed by the US Senate on Wednesday to serve as the central bank's vice chair for supervision, further signaling a shift to lighter regulation under President Donald Trump.

Bowman, a fifth-generation banker and Republican, has long touted the need for more “tailored” oversight in her speeches. She has signaled significant changes in regulatory priorities and has a friendlier relationship with the bank industry than her predecessor, Michael Barr.

Barr resigned from the role earlier this year. She frequently countered him on issues including bank oversight, stress-test reforms and capital rules.

Bowman has said that watchdogs should be better aligned in their goals for the financial system. That effort has already started to take shape, with Treasury Secretary Scott Bessent hosting Bowman and other regulators for private meetings in a bid to streamline oversight, according to people familiar with the matter. Bowman has also hired advisers from lending giant Goldman Sachs Group Inc., Wall Street legal heavyweight Davis Polk & Wardwell and big-bank lobbying powerhouse, the Bank Policy Institute.

Bowman has said that she will work with officials at the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to re-propose a landmark US bank-capital proposal known as Basel III endgame. She was a sharp critic of the plan as originally drafted, which would have hiked the biggest banks' capital requirements by 19% to buffer against losses and a financial crisis.

She is also working with other regulators on potential changes to the supplementary leverage ratio. Critics have argued the SLR has limited banks' purchases of traditionally safer instruments like US Treasuries. Bessent said in May that officials may move this summer on easing that capital rule.

Dennis Kelleher, president of Washington-based consumer advocacy group Better Markets, said Bowman's role is to protect the jobs and savings of everyday Americans from the risks of Wall Street.

“Unfortunately, Bowman has the opposite views: while claiming to care about Main Street, she enthusiastically and unequivocally supports those banks' priority of deep, broad and mindless deregulation,” Kelleher said.

But industry groups, like the Independent Community Bankers of America, said in a statement that Bowman's real-world experience gives her a keen understanding of how certain regulations applied universally — regardless of a bank's complexity or risk profile — impedes access to credit for those who need it most.

Bowman told lawmakers in April that regulation has become overly complicated and redundant. She said she would “prioritize reforming and refocusing supervision, restoring regulatory tailoring, ensuring a viable path for innovation in the banking system, and promoting transparency and accountability” if confirmed.

Bowman, who previously served as the state bank commissioner of Kansas, was nominated in 2018 by Trump to become a member of the Fed's board.

Source: Bloomberg Europe

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Manuel

Economic

Central Bank

The European Central Bank is almost certain to cut interest rates again on Thursday and keep all options on the table for subsequent meetings, even as the case grows for a pause in its year-long easing cycle.

The ECB has cut rates seven times in 13 months as inflation eased from post-pandemic highs, seeking to prop up a euro zone economy that was struggling even before erratic U.S. economic and trade policy dealt it yet another blow.

With inflation now safely in line with its 2% target and a cut flagged by a host of policymakers, Thursday's decision will be uncontroversial, with the focus on what signals ECB President Christine Lagarde might send about policy ahead.

Investors are already pricing in a pause in July, and some conservative policymakers have advocated a break to give the ECB a chance to reassess how exceptional uncertainty and policy upheaval both at home and abroad will shift the outlook.

"Getting the hawks to support a June cut may require a hint of conditional patience: an implicit willingness to pause in July and wait until September before easing again, as long as there were no major downside surprises in the meantime," Deutsche Bank analysts said in a note.

The case for a pause rests on the premise that the short- and medium-term outlooks for the 20-country currency bloc differ greatly and may require a different policy response.

Inflation could dip in the short term, possibly even below the ECB's target, but increased spending and higher trade barriers could add to price pressures later.

The added complication is monetary policy impacts the economy with a 12-to-18 month lag, so that support approved now could be giving help to a bloc that no longer needs it.

A cut on Thursday would take the deposit rate to 2.0%, which the ECB considers "neutral" - no longer holding back the economy but not yet stimulating it either.

DIVERGENT OUTLOOK

Acknowledging near-term weakness, the ECB is expected to cut both its growth and inflation projections for next year.

U.S. President Donald Trump's trade war is already damaging activity and will have a lasting impact even if an amicable resolution is found, given the hit to confidence and investment.

This sluggish growth, along with lower energy costs and a strong euro, will curb price pressures.

"Uncertainty around tariffs is extremely elevated, and that is not conducive to firms taking longer-term decisions around investment and hiring," Investec economist Sandra Horsfield said. "In the near term (that) will be a disinflationary force in its own right, quite irrespective of where tariffs eventually settle."

Most economists think inflation could fall below the ECB's 2% target next year, triggering memories of the pre-pandemic decade when price growth persistently undershot 2%.

Further ahead, the outlook changes significantly.

The European Union is likely to retaliate against any permanent U.S. tariff, raising the cost of international trade. Firms may meanwhile relocate some activity to avoid trade barriers but changes to corporate value chains are also likely to raise costs.

Higher European defence spending, particularly by Germany, and the cost of the green transition could add to inflation while a shrinking workforce as the bloc's population ages will keep wage pressures elevated.

"We think the window for ECB rate cuts will close over the late summer," UBS economist Reinhard Cluse said.

"We believe the ECB might have to hike rates again in late 2026 to counter rising inflation pressure in 2027, amid a euro zone - German - labour market that is subject to structural tightness during the demographic transition."

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Cryptocurrency

Central Bank

Brazil’s Central Bank plans to treat transaction data from its central bank digital currency (CBDC) infrastructure, called Drex, as a direct input for setting the country’s interest rate benchmark.

Central bank executive Henrique Videira said on June 4 at the Token Nation conference in São Paulo that every payment and asset transfer recorded on Drex’s distributed ledger will generate a time-stamped, structured entry.

By aggregating those entries at the group level, the monetary authority expects to measure consumption shifts, liquidity pockets, and sector performance in near real time.

Staff economists would feed the metrics into existing output gap and credit supply models before each Monetary Policy Committee meeting.

Videira said: “We want a faster read on economic activity than tax receipts or bank statements provide.”

He added that Drex stores only hashed personal identifiers, which prevents individual tracing.

Real-time ledger data for rate decisions

The initiative extends the bank’s strategy of supplementing survey and banking system indicators with on-chain evidence.

Videira outlined a workflow in which anonymized Drex data passes through internal filters, merges with wholesale settlement flow on the same ledger, and appears on policy dashboards that track spending by merchant category, collateral movements, and regional trade volumes.

When output falls below potential or liquidity tightens, the board could weigh a rate cut earlier than usual. Conversely, when spending runs hot, the same dashboards could support a quicker tightening vote.

The executive framed the approach as an analytic upgrade rather than a delegation of policy to an algorithm.

Videira also detailed a credit access channel. Borrowers with limited bank history could authorize lenders to review their Drex cash flow records, providing auditable evidence of income without requiring pay stubs.

He said the central bank plans to publish a consultation paper on that model this year, noting that the ledger keeps user names off-chain while preserving transaction integrity through consensus validation.

Blockchain and AI

The bank wants universities, startups, and public agencies to build analytics layers on Drex. Videira stated that large language models allocate a substantial portion of their computational budget to processing unstructured inputs.

A ledger that labels fields, such as payer type and merchant code, enables the engines to proceed directly to pattern recognition. It added that agricultural agency Embrapa and public health institutes could query anonymized datasets to improve crop yield forecasts or disease spread simulations.

The Drex pilot entered limited production in March, with 16 institutions testing tokenized public debt and deposit tokens. Full rollout depends on congressional approval of the proposal introduced last month.

Videira closed by noting that policy ownership remains with the monetary board, but the transaction layer belongs to society.

Source: Cryptoslate

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Manuel

Commodity

Energy

Oil fell on signs Saudi Arabia wants another major production increase, raising expectations that a glut of crude will form this year.

West Texas Intermediate slid 0.9% to settle below $63 a barrel, paring losses of almost 2% after Bloomberg News reported that the de facto OPEC leader is open to additional significant output hikes in a bid for market share. The kingdom wants the group to add at least 411,000 barrels a day in August and potentially September, ideally as quickly as possible to take advantage of peak summer demand, according to people familiar with the matter.

The cartel’s intentions have already been well telegraphed, despite the market’s knee-jerk reaction, said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.

“Still, it shows the course that OPEC is currently on will likely continue,” she added.

The development helped jolt crude out of a listless trade on mixed demand data. US government figures showed the country’s crude stockpiles fell 4.3 million barrels last week, raising expectations of near-term tightness. Meanwhile, gasoline demand declined.

Oil rose at the start of the week after a decision by OPEC+ to raise production in July was in line with expectations. Saudi Arabia led increases in OPEC oil production last month as the group began its series of accelerated supply additions, according to a Bloomberg survey. Nevertheless, the hike fell short of the full amount the kingdom could have added under the agreements.

Saudi Aramco, meanwhile, cut its oil prices to Asia after OPEC+ continued with its outsized output increases for a third month. The decrease is smaller than a 35-cents-a-barrel reduction anticipated in a survey of refiners and traders.

Prices are still down about 12% this year on fears around a looming supply glut, while traders continue to monitor US trade tariffs as President Donald Trump said his Chinese counterpart is “extremely hard” to make a deal with.

Source: Bloomberg

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Manuel

Bond

Forex

Treasury yields tumbled after weaker-than-expected gauges of job creation and service-sector activity strengthened traders’ conviction that the Federal Reserve could cut interest rates as soon as September.

Two- to 10-year yields reached the lowest levels since at least May 9 after the ISM Services gauge for last month signaled contraction for the first time in a year. The bond market added to earlier gains unleashed by ADP Research data showing that private-sector job growth was the weakest in two years. The US government’s broader employment data for May, to be released Friday, is expected to show deceleration also.

The ADP data drew a swift response from US President Donald Trump, stating in a social media post that the Fed needs to cut interest rates, a demand he’s made repeatedly. Traders of swap contracts that predict Fed rate changes priced in higher odds of two quarter-point cuts by year-end, in October and December. The possibility of a move in September increased to more than 90% from around 82%.

“The data is a sign that the weakening I — and many — have been expecting might be starting to happen,” said Campe Goodman, fixed-income portfolio manager at Wellington Management. Investor focus has been “too much on the longer-term budget issues and not enough on what the near-term growth picture might do.”

A subsequent drop in oil prices on signs that Saudi Arabia in open to increasing production subsequently spurred yields to session lows, with five- to 30-year tenors sliding at least 10 basis points on the day, the benchmark 10-year note’s to 4.35%.

Ahead of Wednesday’s data, traders were ramping up bets against Fed rate cuts this year. Expectations have waxed and waned since December, when the central bank did the last of three cuts totaling 100 basis points, setting its target band for the US overnight lending rate at 4.25%-5%. The prospect that the Trump administration’s tariffs agenda will reignite inflation has curbed wagers on additional rate cuts, despite signs of slowing economic growth.

Friday’s jobs report is forecast to show employers added 130,000 workers in May, following an April increase of 177,000. The unemployment rate is predicted to remain steady at 4.2%, according to a Bloomberg survey of economists.

“We are looking at the unemployment rate given it’s more of a clear signal,” Molly Brooks McGown, US rates strategist TD Securities, said on Bloomberg Television. An upward move in the unemployment rate to 4.5% — from the current 4.2% — would see the “Fed get more concerned,” Brooks McGown said.

That would “probably” make most investors more comfortable with the Fed stepping in, she said.

What Bloomberg Strategists Say

Donald Trump just posted in reaction to the ADP employment change miss that Fed Chair Jerome Powell “must now LOWER THE RATE.” While it’s unlikely that Powell himself will be influenced by the president’s constructive critique, there are some people with an eye on replacing Powell who may adjust their tone in response. Moreover, bonds are extending their gains following his comments, which may reflect algos trading on Trump headline

Sebastian Boyd, macro strategist

Other US economic indicators have continued to show strength. While the ISM Services gauge and its new orders component indicated contraction, its employment measure unexpectedly detected expansion for the first month in three. A gauge of prices paid by businesses in the sector rose more than anticipated to the highest level since November 2022.

Still, “Treasuries shorts are getting nervous,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.

A separate US government gauge of hiring strength released Tuesday showed that job openings unexpectedly rose in April in a fairly broad advance and hiring picked up, spurring Treasury yields higher.

“The JOLTS data seemed to indicate the labor market is holding in better than the ADP report suggests,” said Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights.

Fading expectations for Fed rate cuts led the Treasury market to a 1% loss in May as measured by a Bloomberg index, its first since December. For 2025 through Tuesday, Treasuries have gained 2.1%.

Source: Bloomberg

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Political

Russia-Ukraine Conflict

Russian President Vladimir Putin told U.S. President Donald Trump on Wednesday that he would have to respond to high-profile Ukrainian drone attacks on Russia's nuclear-capable bomber fleet and a deadly bridge bombing that Moscow blamed on Kyiv.

The war in Ukraine is intensifying after nearly four months of cajoling and threats to both Moscow and Kyiv from Trump, who says he wants peace after more than three years of the deadliest conflict in Europe since World War Two.

After Ukraine bombed bridges and attacked Russia's fleet of nuclear-capable bombers deep in Siberia and Russia's far north, Putin on Wednesday said he did not think Ukraine's leaders wanted peace.

Shortly after Putin discussed the attacks with top ministers in Moscow, Trump said he had spoken by telephone with Putin for one hour and 15 minutes, and that they had discussed the Ukrainian attacks and Iran.

"We discussed the attack on Russia’s docked airplanes, by Ukraine, and also various other attacks that have been taking place by both sides. It was a good conversation, but not a conversation that will lead to immediate Peace," Trump said on social media.

Russia has unleashed several massive aerial attacks on Ukraine over recent weeks.

"President Putin did say, and very strongly, that he will have to respond to the recent attack on the airfields," Trump said, adding that he hoped Putin could be helpful in U.S. negotiations with Iran over the Islamic Republic's nuclear programme.

Trump said he believed Putin agreed with Washington that Iran "cannot have a nuclear weapon," and accused Tehran of "slowwalking" decisions regarding the talks.

Trump has been unusually silent on the Ukrainian attacks on the Russian bombers - one of the three pillars of Russia's nuclear arsenal - though Moscow demanded that the United States and Britain restrain Ukraine.

The Kremlin said Trump had told Putin that Washington was not informed in advance of the Ukrainian attacks. Trump's Ukraine envoy said the risk of escalation from the war in Ukraine was "going way up" after the strikes.

Russia and the United States are by far the world's biggest nuclear powers: together they hold about 88% of all nuclear weapons.

Each has three ways of nuclear attack - strategic bombers, land-launched intercontinental ballistic missiles and submarine-launched ballistic missiles - and any attack on any part of the "triad" is considered a grave escalation.

WAR OR PEACE?

In some of his most hawkish remarks in recent months on the outlook for peace, Putin on Wednesday said the bridge attacks had been directed against civilians and accused Ukrainian leadership of being a "terrorist organisation" supported by powers who were becoming "terrorist accomplices."

"The current Kyiv regime does not need peace at all," Putin said at a meeting with senior officials. "What is there to talk about? How can we negotiate with those who rely on terror?"

Ukraine has not commented on the bridge attacks. It denies it targets civilians, as does Russia, though civilians have been killed by both sides.

Kyiv has similarly accused Moscow of not seriously wanting peace, citing as evidence Russian resistance to an immediate ceasefire. Russia says certain conditions must first be met.

Putin, in his public remarks, did not mention the bomber attacks, which came just before Russia and Ukraine met for direct peace talks in Istanbul where Moscow set out what the United States has called "maximalist" aims.

Before Putin spoke, other Russian officials said military options were "on the table" for its response to Ukrainian attacks deep inside Russia and accused the West of being involved in them.

"We urge London and Washington to react in such a way as to stop further escalation," Russian Deputy Foreign Minister Sergei Ryabkov was quoted by the Interfax news agency as saying. Ryabkov oversees relations with the U.S. and arms control.

British and U.S. officials have said they had no prior knowledge of the weekend attacks on Russian nuclear-capable long-range bombers. The White House has said Trump was not informed of Ukraine's drone attack before it unfolded.

Source: Reuters

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Adam

Forex

U.S. President Donald Trump’s trade policies have rocked global equities in recent weeks, driving investors to seek out pockets of safety in financial markets.

One of the beneficiaries of the market volatility has been the Swiss franc

, widely seen as a safe haven asset in times of macroeconomic or geopolitical uncertainty. The Swiss currency has appreciated 10% against the U.S. dollar since the beginning of the year – but inside Switzerland’s borders, rising demand for the franc is stirring up challenges for policymakers.

The Swiss franc was last seen trading 0.2% higher against the greenback, with $1 buying around 0.82 Swiss francs. Switzerland’s currency, which was trading flat earlier on Wednesday, rallied after ADP data showed hiring slowed to a two-year low in America’s private sector last month.

A strong franc puts deflationary pressure on Switzerland. As the currency appreciates, imports – which play a significant role in the country’s economy – become cheaper.

For some countries, this effect might be a welcome reprieve from sticky inflation. But while many developed markets, such as the U.S. and the U.K., are still working to bring inflation down to their 2% targets, Switzerland is facing the opposite problem: prices are falling too much.

Swiss inflation turned negative in May, with the country’s Consumer Price Index falling by 0.1% year-on-year. The price of imported goods contracted significantly, falling by 2.4% on an annual basis after staying flat in the previous month.

Charlotte de Montpellier, senior France and Switzerland economist at ING, noted the role the currency rally was playing in the country’s inflation picture.

“The latest decline is largely driven by external factors,” she said in a note on Tuesday. “A strong Swiss franc has significantly reduced the cost of imported goods ... Given that imports make up 23% of the CPI basket, this has a notable impact on overall inflation in Switzerland.”

The May data marked Switzerland’s first return to deflation since the Covid-19 pandemic. It could push the Swiss National Bank toward utilizing two key policies previously implemented to address what De Montpellier labeled a “persistent headache” for the central bank.

Negative interest rates

The SNB ended a seven-year stretch of negative interest rates in 2022 — an unpopular policy with savers and lenders, as they eliminate returns on savings deposits and squeeze banks’ margins and profitability.

At its most recent meeting in March, the central bank cut its key rate by 25 basis points to 0.25%.

In the wake of this week’s inflation data, the SNB is expected to “seek to combat the appreciation of the Swiss franc with the weapons at its disposal,” De Montpellier said.

ING expects the SNB to cut its key interest rate by 25 basis points at its next meeting later this month — and De Montpellier argued that further cuts will likely follow.

“Based on current data, a return to negative interest rates before year-end appears increasingly probable,” she said. “Our base case includes a second 25bp cut in September, bringing the policy rate to -0.25%. While the SNB would prefer to avoid deeper cuts, a 50bp reduction in June cannot be ruled out.”

While ING expects Swiss policymakers to stop cutting rates at -0.25%, De Montpellier said a further strengthening of the Swiss franc “could force [the SNB’s] hand,” leaving it with little choice but to take rates further into negative territory.

Lily Fang, a professor of finance at business school INSEAD, told CNBC that current conditions were likely to push Switzerland back into a negative rates environment — a move that SNB Chair Martin Schlegel has stressed remains on the table.

“The Swiss authorities are clearly concerned, because … it’s a small, open economy that relies on international trade, and the U.S. in particular is their single most important trading partner beyond the EU bloc,” Fang said in a phone call.

“Switzerland has already gone ahead and lowered rates ahead of the EU. I think it is very likely to go to zero and even negative.”

Currency intervention

Another tool the SNB has previously used to cool the Swiss franc is intervening in the foreign exchange market by selling the franc and purchasing foreign currencies.

However, with U.S. President Donald Trump back in the White House, this strategy now comes with political challenges.

Back in 2020, the U.S. Treasury, under the first Trump administration, labeled Switzerland a currency manipulator, accusing it of deliberately devaluing the Swiss franc against the greenback. The SNB denied those allegations at the time.

Trump’s full list of so-called reciprocal tariffs said “currency manipulation and trade barriers” had been factored into calculating the levies individual countries were imposing on the United States. The administration said it had calculated that Switzerland — which abolished all industrial tariffs last year — charged tariffs of 61% to the U.S., and it would therefore slap new tariffs of 31% onto Swiss goods.

While ING’s De Montpellier acknowledged that any possible FX intervention from the SNB risked “provoking the ire of the US administration,” she argued it was likely the central bank would intervene in markets in the coming months.

Alex King, a former FX trader and founder of personal finance platform Generation Money, agreed that any direct purchase of foreign currencies by the SNB was “unlikely to sit well with the US administration.”

“When Switzerland was labelled a currency manipulator in 2020 the threat of tariffs wasn’t such a major factor, but it now has a dilemma on its hands,” he told CNBC in an email. “If it was to intervene directly again in FX markets, it could get hit with higher US tariffs, and the negative impact of this could be worse than short term inflationary pressures.”

Last month, SNB’s Schlegel said Swiss officials had held constructive talks with the U.S. on the central bank’s FX interventions, in comments cited by Bloomberg.

“We have never influenced the exchange rate to get us an advantage,” he reportedly told an audience in the Swiss city of Lucerne.

“I’m not sure that they will immediately go and use currency intervention, market intervention, because the U.S. tends to be … labeling countries ‘manipulators,’” added INSEAD’s Fang. “I don’t think that they really want to be labeled as a manipulator again, [so] I think that they will use that probably as a last resort tool.”