Global Forex and Fixed Income Roundup: Market Talk

1123 GMT - Falls in the safe-haven Swiss franc are limited even as risk appetite improves on U.S. trade deal hopes, sending U.S. stock futures and the dollar higher while gold prices fall. This could be partly because the Swiss National Bank has limited scope to reduce Switzerland's already low interest rates or to intervene to curb the currency's gains, ING currency analyst Chris Turner says. The euro is "looking a little soft" against the Swiss franc despite the rebound in equities, he says. The euro rises 0.1% to 0.9368 francs and looks likely to drop back toward 0.92 francs if investors' current risk appetite isn't sustained, he says. The dollar edges up only marginally to 0.8267 francs. (jessica.fleetham@wsj.com)

1114 GMT - Actively managed funds have piled into bonds and away from equities since the start of 2024, marking a shift which could continue for some time given the deteriorating economic outlook, a co-manager of the Abrdn Short Dated Enhanced Income Fund says in a market comment. "Current investor sentiment is fragile, and bonds could offer a relatively safe haven, particularly if the slowdown extends into recession," Mark Munro writes. Depending on individual investor risk appetite, some might want to focus on corporate or on government bonds. The manager prefers defensive stocks and companies with resilient cash flows, and is less inclined to hold cyclical and tariff-exposed sectors such as autos and industrials in this environment. (elena.vardon@wsj.com)

1001 GMT - Yields on U.K. government bonds fall, tracking declines in U.S. Treasury yields, as investors price in more interest-rate cuts from the U.S. Federal Reserve and the Bank of England due to weakening economic data. Markets price in 97 basis points of BOE rate cuts this year, and 100 basis points of Fed interest rate cuts over the same period, LSEG data show. Morgan Stanley expects the BOE to have back-to-back interest-rate cuts from May to November, and "the chances of a 50 basis-point BOE rate cut in either June or August are quite elevated," the bank's analysts say in a note. (miriam.mukuru@wsj.com)

0948 GMT - The dollar could turn lower if the ISM's U.S. manufacturing report comes in weaker than expected, ING analyst Chris Turner says in a note. Market forecasts for the manufacturing purchasing managers' index are already quite low so anything below that could "trigger another leg lower in the dollar." Economists in a Wall Street Journal survey expect the index to fall to 47.8 in April from 49.0 in March. A level below 50 signals a contraction in manufacturing activity. The data are due at 1400 GMT. The DXY dollar index rises 0.4% to 99.8550.(renae.dyer@wsj.com)

0927 GMT - Bitcoin rises slightly following upbeat U.S. tech earnings and news that the Trump administration is inching closer toward trade deals. Microsoft and Meta reported stronger-than-expected first-quarter results. This suggests robust consumer demand despite tariff concerns, Tickmill Group's Patrick Munnelly says in a note. Investor sentiment has also improved after the Trump administration suggested the U.S. is closer to unveiling its first set of trade agreements, he says. Bitcoin rises 0.8% to $95,326, according to LSEG. (renae.dyer@wsj.com)

0922 GMT - U.K. households are beginning to rein in their spending amid fears of an economic slowdown, Ashley Webb at Capital Economics says. Consumer credit rose by 900 million pounds in March, a slower pace of increase than a month earlier and than the average of the last six months, figures show Thursday. "This suggests households started to spend a bit more cautiously amid the weakening employment outlook even before the new U.S. tariffs regime hit consumer sentiment in April," Webb writes in a note to clients.(joshua.kirby@wsj.com; @joshualeokirby)

0839 GMT - The prospect of a slower pace of interest-rate rises by the Bank of Japan could help dampen the Japanese yen's recent strength in the near term, MUFG Bank analyst Lee Hardman says in a note. The BOJ on Thursday left rates unchanged while sounding more cautious about the prospect of further rate rises with downgrades to economic growth and inflation forecasts. This should curb the yen's strength, Hardman says. However, it's unlikely to reverse the safe-haven yen's appreciating trend if global growth continues to slow and other major central banks cut rates further, he says. The dollar rises 0.8% to 144.215 yen after earlier hitting a three-week high of 144.748, according to FactSet. (renae.dyer@wsj.com)

0833 GMT - The cost of insuring euro credit against default using credit default swaps falls as sentiment improves following better-than-expected earnings from Microsoft and Meta on Wednesday. "Meta and Microsoft post impressive results, allaying fears of a slow down in AI investment," Quilter Cheviot analyst Ben Barringer says in a note. The iTraxx Europe Crossover index which tracks euro junk bond credit default swaps declines 6 basis points to 344bps, S&P Global Market Intelligence data show. The iTraxx Europe Main index which tracks euro investment-grade credit default swaps falls 1bp to 67bps. (miriam.mukuru@wsj.com)

0831 GMT - Sterling stands to benefit from the prospect of closer ties between the U.K. and the EU, ING's Chris Turner says in a note. The U.K. is expected to sign a new security and defense pact with the EU at the first U.K.-EU summit since Brexit on May 19. A closer relationship with Europe could see the U.K.'s Office for Budget Responsibility score U.K. growth prospects higher in November, Turner says. That will give U.K. Treasury chief Rachel Reeves more room to spend. The euro last trades flat at 0.8500 pounds and ING expects it could reach 0.8430 if it achieves a clear break below 0.8500. (renae.dyer@wsj.com)

0817 GMT - U.S. Treasury yields fall on improved risk appetite as concerns about global trade tensions ebb and after Wednesday's weak U.S. first-quarter gross domestic product data. Short-dated yields in particular are pulled lower as investors increasingly expect interest-rate cuts from the Federal Reserve, with money markets pricing in 100 basis points of reductions this year, LSEG data show. "The declining U.S. 2-year yield suggests that part of the stock rebound is being driven by rising expectations of deeper Fed cuts," Swissquote Bank'sIpek Ozkardeskaya says in a note. The U.S. 2-year Treasury yield declines to 3.609%, after touching a 3.5-week low of 3.591% on Wednesday, Tradeweb data show. The 10-year yield falls 2 basis points to 4.152%. (miriam.mukuru@wsj.com)

0755 GMT - The euro could extend its falls against the dollar as the reduction in dollar risk premium potentially has further to go, ING's Chris Turner says in note. A slightly more positive environment has seen risk premium come out of the dollar, he says. This is helped by optimism over U.S. trade talks and the U.S. signing a minerals deal with Ukraine. "Many European markets are closed for the Labour Day public holiday, but the euro could drift towards the $1.1250/60 area unless the [U.S. ISM manufacturing data] has a big miss on the downside." The data are due at 1500 GMT. The euro falls to a two-week low of $1.1287, according to FactSet. (renae.dyer@wsj.com)

0753 GMT - Singapore has avoided the worst of U.S. tariffs, but its heavy reliance on global trade and growth leaves the economy vulnerable, ING says. It cuts Singapore's 2025 growth forecast by 100 bps to 1.6%, expecting tariffs to reduce exports by 0.7% of GDP. The impact on GDP growth will be larger, as the second-round effects affect other parts of the economy, especially manufacturing and employment, ING's Deepali Bhargava says. Manufacturing was weaker than expected in 1Q, likely to stay that way throughout the year and could spill over into services, she adds. The interconnectedness of Singapore's economy with global supply chains amplifies the risks that it faces, she says, and outward-oriented services sectors, such as finance & insurance, could slow as external demand softens. (fabiana.negrinochoa@wsj.com)

The Swiss franc traded around 0.83 per USD, holding close to its lowest since early April, as the dollar gained ground on improved investor sentiment amid optimism over softening U.S.-China trade tensions, fueled by reports of possible Chinese tariff exemptions.

In parallel, the Trump administration hinted it could reduce tariffs on Chinese imports, depending on the progress of talks with Beijing.

On the domestic front, Swiss National Bank Chairman Martin Schlegel cautioned that rising global economic risks are likely to weigh on Switzerland’s growth outlook.

Speaking at the central bank's annual general meeting, he noted, “It remains very uncertain how inflation and the economy in Switzerland will develop.

The very modest US dollar (US) bounce has seen trade a little lower, said ING.

Over recent weeks the bank had mentioned that an extreme 5%-6% risk premium in the US dollar could see briefly trade 1.15/16 — which it saw on Monday — but that risk premium is now starting to come out of the US dollar as the mood music on trade improves and President Donald Trump has backed Federal Reserva Chair Jerome Powell.

No one has any confidence about how long these calmer conditions will last, stated ING. What the bank would say is that some further modest advance in United States equities could drag back to the 1.1250 area and it may be there — 1.1250 — where all the 'structural' US dollar sellers could re-emerge if you believe Trump's destruction of the rules-based international order has permanently damaged the US dollar's status as the leading reserve currency.

ING has its doubts about the above — and have an end-quarter target at 1.13 — but would revise that higher if the U.S. data fell away more quickly and the Fed had to cut more than the 100bps-125bps currently priced in. There shouldn't be much market-moving data on Friday, so risks a dip under 1.1300 to 1.1250 should U.S. equities continue to creep higher.

Elsewhere, sterling (GBP) is doing well after another good retail sales figure, wrote the bank in a note. breaking under 0.8520/25 could lead to a much deeper correction.

Swiss Central Bank (SNB) President Martin Schlegel speaks at 10 CET on Friday. He delivers the SNB's annual report. Investors will be on the lookout for what he says about interest rates, added ING. Markets expect the SNB to cut rates back into negative territory in June — something the central bank is reluctant to do.

However, the bank expects Schlegel to keep all the SNB's options open, including rate cuts and heavy foreign exchange buying to limit Swiss franc (CHF) strength. In reality, however, ING thinks the SNB's foreign exchange intervention powers are constrained and that will quickly trade to 0.92 again should financial market volatility pick up this quarter.

Thursday saw gains across regional currencies including in Hungary, where rates went in the opposite direction. In this case, ING will look more at global sentiment and the risk-on mood that dominated Thursday. probably went too far and the bank sees levels more around 4.270 indicated by the rates market.

On the other hand, may have further downside and test 24.900 on Friday, in the bank's view.

The Swiss franc weakened almost 1% to near 0.83 per USD, its lowest since April 9, as traders rushed back into the dollar, encouraged by reduced concerns about the Federal Reserve’s independence and increasing optimism over US-China trade talks.

This decline followed a strong rally that took the franc to its highest level in over a decade on April 21, driven by its status as a safe-haven asset amidst ongoing global trade uncertainty and erratic policy decisions from President Trump’s administration.

Most safe-haven currencies weaken in the morning Asian session as hopes for easing U.S.-China tensions spark risk appetite. Treasury Secretary Bessent said overnight that he sees a de-escalatory path forward regarding the U.S. trade standoff with China, CIMB's Treasury and Markets Research team says in a note. Also, President Trump backed down from Fed interference on Tuesday, saying he has no intention of firing Fed Chair Powell, the team says. Safe-haven currencies such as CHF and JPY have either pared earlier gains or lost ground, the team adds. USD/CHF is up 0.6% to 0.8236; USD/JPY is 0.4% higher at 142.15. (ronnie.harui@wsj.com)

The Swiss franc appreciated toward 0.80 per dollar in April, extending the month's rally to its strongest in over a decade, as increasing uncertainty in US economic policy pressured the greenback and favored the franc as the global safe-haven currency.

The latest wave of inflows to Swiss markets was after the US Trump administration backed their threats that Fed Chair Powell might be dismissed by the President for not cutting interest rates, jeopardizing the central bank's independence.

This magnified the franc's earlier rally after Trump's aggressive reciprocal tariff package drove investors to favor real foreign money and gold instead of dollar securities.

The strengthening of the franc against the euro stoked speculation that the SNB may intervene in currency markets or retest negative interest rates.