Swiss National Bank Expected to Cut Rates Below Zero Next Week

Economic

Forex

Summary:

The Swiss National Bank (SNB) is likely to cut its policy rate by 50 basis points next week, bringing it back...

The Swiss National Bank (SNB) is likely to cut its policy rate by 50 basis points next week, bringing it back into negative territory for the first time since 2022, according to a new forecast from Capital Economics.

The SNB reduced its policy rate by 25 basis points to 0.25% at its last meeting, but inflation has since fallen into negative territory in May, significantly below the central bank’s March forecast of 0.3% for the second quarter. Core inflation dropped to just 0.5% in May, suggesting underlying price pressures are weaker than previously anticipated.

The Swiss franc has appreciated approximately 4% on a trade-weighted basis since the SNB’s March meeting, following what Capital Economics refers to as Trump’s "Liberation Day." According to an SNB working paper, this currency strength could reduce inflation by 0.5% annually over the next three years.

Capital Economics notes the risks are skewed toward the SNB undershooting its price stability target of 0-2% inflation. While there may be a short-term boost to demand as businesses front-run potential tariffs, particularly in the pharmaceutical sector, U.S. trade policy will likely have a negative impact on Swiss demand over the medium term.

If Switzerland secures a trade deal with the United States, it may include reduced barriers to agricultural trade, which could further weigh on inflation given the high level of Swiss food prices, according to the research firm.

Source: Investing

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Adam

Commodity

Oil Pulls Back After Rally Stalls Near Technical Resistance

Crude oil futures turned sharply lower Thursday, giving up earlier gains as traders took profits and reassessed risk ahead of critical geopolitical developments. West Texas Intermediate (WTI) spiked to $69.29 in early trading but reversed sharply, setting up a possible closing price reversal top—a technical warning sign that suggests a near-term pullback may be underway.

Wednesday’s breakout above the 200-day moving average at $66.43 marked a bullish shift, turning that level into key support. However, the rally failed to challenge the April 2 peak of $71.17, stalling instead at resistance around $68.21. Traders may now look for a retest of the 200-day average as bulls regroup.

Middle East Risk Premium Fades as Traders Eye U.S.-Iran Talks

Prices initially climbed on Wednesday after reports confirmed the U.S. would partially evacuate diplomatic personnel from Iraq and Bahrain due to heightened regional tensions. President Trump emphasized the potential danger in the region, reaffirming U.S. opposition to Iran’s nuclear ambitions.

Yet by Thursday, the rally faded as traders weighed the possibility of de-escalation. The U.S. and Iran are scheduled to hold high-level talks on Sunday in Oman. U.S. Special Envoy Steve Witkoff will meet Iranian Foreign Minister Abbas Araghchi to discuss a potential deal on Iran’s nuclear activities.

Strait of Hormuz in Focus for OPEC Watchers

Oil traders remain focused on the Strait of Hormuz, a vital chokepoint for nearly 20% of global oil flows. Any disruption there could have a major supply impact. Global Risk Management analyst Arne Rasmussen warned that a closure would be a “nightmare” scenario for the oil market.

Britain’s maritime agency has issued cautionary guidance to vessels operating in the Gulf, Gulf of Oman, and the Strait of Hormuz, citing risk of military escalation. The situation is especially critical given Iraq’s role as the second-largest crude producer in OPEC.

Iranian Threats and U.N. Violation Add to Market Jitters

Iran’s Defense Minister has threatened to strike U.S. bases if talks fail, while President Trump continues to hint at possible military action. Meanwhile, the U.N. nuclear watchdog declared Iran in violation of non-proliferation rules, its first such ruling in nearly 20 years, raising the prospect of U.N. Security Council involvement.

Despite this, some traders believe the weekend talks may calm tensions. OANDA analyst Kelvin Wong noted that recent price gains hit key resistance levels, triggering some to book profits and reduce exposure.

Oil Prices Forecast: Bearish Near-Term as Market Lacks Catalyst

WTI briefly broke above $69, but the rally stalled and reversed sharply, signaling a potential short-term top. The lack of follow-through, combined with technical rejection near $68.21 and evident profit-taking, points to downside risk.

While the 200-day moving average around $66.43 now serves as key support, traders will be watching closely for headlines out of Sunday’s U.S.-Iran talks for direction. In the absence of a supply shock or a sustained breakout, the near-term oil prices forecast remains cautiously bearish.

source : fxempire

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Michelle

Economic

Forex

The dollar extended its decline as worries over US tariffs increased after President Donald Trump said he would notify trading partners soon of unilateral levies.

The Bloomberg Dollar Spot Index slid as much as 0.6% to the lowest level since July 2023 on Thursday, extending the previous day’s drop spurred by softer US inflation data. The euro rose to its strongest since November 2021.

Traders will be monitoring US producer-price data due later Thursday for confirmation of subdued pressures. Some of its components feed into core personal consumption expenditure, the Federal Reserve’s preferred measure of inflation. They will also watch an auction of 30-year Treasuries after yields surged last month on fiscal concerns.

“Dollar weakness has much more room to run,” said Vasileios Gkionakis, senior economist and strategist at Aviva Investors. He added the greenback’s weakness despite rising yields show eroding investor confidence in US assets.

The dollar’s decline spilled into the currency volatility market, reinforcing the inverse correlation between the greenback and hedging costs recently. Demand was particularly pronounced in the one-week tenor, which captures the Fed’s June 18 policy meeting.

What Bloomberg’s Strategists Say...

“Trader pricing still favors more Federal Reserve interest rate cuts, although the precise timing flips around depending on the prevailing investor mood. But what is consistent is the US dollar ploughing a path to the downside as FX trader convictions firm.”

— Mark Cranfield, Markets Live Strategist, Singapore

Currency traders will also be watching the upcoming Group-of-Seven summit for any trade negotiation developments.

“We are watching the G-7 summit closely for pending trade deals between the US and its key trading partners (e.g., Mexico and Canada),” said Alex Loo, macro strategist at TD Securities in Singapore. “Leaks this week may boost sentiment, especially the likes of Canadian dollar and Mexican peso.”

Source: Yahoo Finance

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Adam

Stocks

China–U.S. Trade War

US stock futures pulled back on Thursday ahead of a fresh batch of inflation data, as investors continued to puzzle over President Trump's ever-evolving trade policy.

Dow Jones Industrial Average futures (YM=F) fell roughly 0.6%, or over 200 points, while S&P 500 futures (ES=F) dropped about 0.4%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) moved 0.3% lower.

Stocks are staying downbeat after the S&P 500 (^GSPC) snapped this week's run of wins, as investors add growing tensions in the Middle East to worries over the fragility of the US-China trade detente.

But the spotlight is on the May reading on wholesale inflation due later, after its consumer counterpart showed an easing in price pressures in the wake of Trump's "reciprocal" tariff hikes in April.

Further hints that tariffs are sparing inflation could put the Federal Reserve in a tight spot ahead of its policy meeting next week. Bets on interest-rate cuts this year have mounted, but analysts expect officials to maintain their wait-and-see approach to economic data and policy decisions.

While investor focus is shifting back to the Fed and away from trade war, Wall Street is following the latest twists and turns in the hunt for clarity around Trump's tariff policy.

US trading partners will get letters within a week or two to set their tariff rates, Trump reiterated on Wednesday, saying they "can take it or leave it." Meanwhile, Treasury Secretary Scott Bessent told Congress it's "highly likely" that countries in trade negotiations with the US will see an extension of the 90-day tariff pause, currently set to expire July 9.

source : finance.yahoo

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Adam

Stocks

China–U.S. Trade War

U.S. stock futures suggest a lackluster start to trading on Wall Street on Thursday, as investors eye recent U.S.-China trade talks and a bevy of fresh inflation data. President Donald Trump has suggested that he is open to possibly extending a 90-day delay to his punishing "reciprocal" tariffs beyond a deadline early next month. Elsewhere, markets are awaiting May producer price figures, while Oracle (NYSE:ORCL) raises its full-year revenue target, sending shares in the cloud-computing group spiking in extended hours trading.

Futures drop

U.S. stock futures pointed lower, with traders gauging a relatively benign consumer price reading and signs of détente in recent trade tensions between the United States and China.

By 03:37 ET (07:37 GMT), the Dow futures contract had slipped by 106 points, or 0.3%, S&P 500 futures had fallen by 13 points, or 0.2%, and Nasdaq 100 futures had declined by 48 points, or 0.2%.

The benchmark S&P 500 and tech-heavy Nasdaq Composite both retreated on Wednesday, while the blue-chip Dow Jones Industrial Average was unchanged. Investors seemed to greet a slower-than-anticipated measure of consumer price growth in May in muted fashion, as worries persisted over the potential impact of Trump’s tariff agenda.

Markets seemed to also be cautiously assessing a framework agreement between Washington and Beijing to resume their fragile trade truce. Trump called the deal "great," although analysts flagged that the announcement was short of many concrete details and possibly left the door open for a future flare-up in the spat between the world’s two largest economies.

Sentiment was dented as well after media reports suggested that the U.S. is preparing for a partial evacuation of its embassy in Iran. An official from Tehran previously said that strikes on U.S. bases in the region would be carried out if ongoing nuclear talks collapse and a conflict emerges with the U.S.

Trump on trade talks

Meanwhile, Trump has hinted at a willingness to possibly extend a delay to his elevated "reciprocal" levies on most countries, saying that negotiations on bespoke trade deals were ongoing with 15 countries.

Speaking to reporters on Wednesday, Trump claimed that the White House was "rocking in terms of deals," adding that "quite a few countries [...] want to make a deal with us."

But he stressed that an extension to a postponement of his heightened duties beyond the current deadline in early July is likely not a "necessity."

Trump added that the U.S. plans to send out letters to dozens of nations in the coming weeks that will set out the terms of trade deals, flagging that these countries will then have to choose whether to "take it, or [...] leave it."

The president paused the implementation of his broadest tariffs in April, in a bid to give negotiators time to hammer out a series of agreements. However, with the 90-day halt set to end on July 8, the U.S. has just one trade deal agreed with Britain and 17 others are being discussed.

PPI ahead

The focus is now turning to a data point due out later today which tracks growth in U.S. producer prices, as markets remain wary of any indications that Trump’s tariffs could be re-fueling inflationary pressures.

Economists anticipated that the producer price index for final demand edged up by 0.2% month-over-month in May, after it fell by 0.5% in the prior month. In the twelve months to May, the measure is seen speeding up to 2.6% from 2.4%.

In April, wholesale services prices slipped by 0.7% -- the biggest fall since the government first began to monitor the numbers in December 2009. Prices for hotel and motel rooms decreased in particular, reflecting a retreat in tourist travel which analysts noted was potentially sparked by a backlash to Trump’s policies since returning to office.

Crucially, accommodations, airline fares, and portfolio management fees make up some of the components that factor into an inflation gauge preferred by Federal Reserve interest-rate setters.

On Wednesday, a separate Labor Department data set showed that consumer prices increased at a cooler-than-projected pace in May, thanks in large part to cheaper gasoline prices counterbalancing an uptick in rent costs.

Oracle earnings

Shares in Oracle surged in extended hours trading after the cloud-computing group lifted its annual revenue growth target and highlighted solid demand from clients aiming to harness artificial intelligence.

Oracle CEO Safra Catz told investors in a post-earnings call on Wednesday that total revenue in its 2026 fiscal year is expected to be at least $67 billion, implying yearly growth of roughly 16.7%.

The company had previously guided for an increase of 15%.

Catz noted that its annual total cloud growth rate, which includes "applications plus infrastructure," will also rise to over 40% from 24% in the 2025 fiscal year, bolstered mostly by solid returns from its Oracle Cloud Infrastructure solution business and clients’ need to support AI workloads.

Analysts at Vital Knowledge called the prospects for Oracle’s growth "amazing," but flagged that "meeting that demand is eating up a lot of cash" and contributing to an elevated projection for annual capital expenditures.

Oil dips

Oil prices slipped, handing back some of the previous session’s sharp gains as the U.S. authorised voluntary departures for military dependents in the Middle East amid rising tensions with Iran.

At 03:42 ET, Brent futures dropped 1.3% to $68.89 a barrel and U.S. West Texas Intermediate crude futures fell 1.2% to $67.33 a barrel.

Both contracts surged over 4% on Wednesday during a turbulent trading session, supported by the progress in U.S.-China trade talks, which has helped reduce demand concerns, with free-flowing trade expected to boost global economic activity and thus crude demand.

Wednesday’s spike reflects heightened geopolitical risk, as investors feared any conflict could disrupt shipping routes or oil infrastructure across the Gulf.

Source: Investing

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Glendon

Economic

Forex

The euro hit its highest level in almost four years against the U.S. dollar as investors rushed into safe-haven assets on Thursday while remaining cautious about the impact of the U.S.-China trade deal.

Geopolitical risks were in focus after U.S. President Donald Trump said some U.S. personnel were being moved out of the Middle East because “it could be a dangerous place,” adding that Washington would not allow Iran to develop a nuclear weapon.

A cocktail of rising Middle East tensions and concern over the fragility of the trade truce between the U.S. and China drew investors into safe-haven assets.

Analysts noted that the U.S. dollar serves as a key barometer of trade talks sentiment, while geopolitical instability prompted investors to buy safe-haven Swiss francs and yen.

The franc rose 0.8% to 0.8138 versus the greenback, its highest level since April 22, and the yen climbed 0.6% to 143.70.

The euro reached its highest since late 2021 at $1.1589 and was last up 0.70% at $1.1568.

Some analysts said the euro has also drawn support from a hawkish European Central Bank, which hinted at a pause in its year-long easing cycle after inflation finally returned to its 2% target.

However, ECB policymaker Isabel Schnabel said on Thursday the strong euro exchange rate is driven by a positive confidence shock in Europe - investors being drawn to the euro as a safe haven - and not by interest rate differentials.

Trade deal deadline

On the trade front, Trump said he would be willing to extend a July 8 deadline for completing trade talks with countries. But he added that the U.S. would send out letters in coming weeks specifying the terms for trade deals to dozens of other countries, which they could then embrace or reject.

Investors argued that such a move keeps the risk of a July 9 jump in U.S. import tariffs on the table, which is regarded as negative for the dollar. The greenback and U.S. Treasuries dropped sharply after Trump announced a blitz of reciprocal tariffs - which he dubbed “Liberation Day” - in early April.

Against a basket of currencies, the U.S. dollar fell to its weakest since April 22 at 98.072 and was last down 0.35% at 98.108. It hit 97.861, its lowest since April 2022.

U.S. Treasury yields dropped on Wednesday as the closely watched “core” consumer price index eased some pressure on the Federal Reserve to maintain higher interest rates for longer.

However, analysts remain cautious about the inflation outlook ahead of Thursday’s release of the producer price index.

“We suspect the core Personal Consumption Expenditures Price Index (PCE) reading will prove modestly firmer, although the result will also hinge on the inputs from core PPI,” said David Doyle, head of economics at Macquarie.

“Despite the subdued figures, through year-end, we expect year-on-year core inflation to remain elevated and potentially (to) rise as price pressures flow from recent tariff implementation.”

Markets priced two Fed rate cuts of 25 basis points by year-end, with an 80% chance of the first move in September and 100 bps by September 2026.

The onshore yuan rose 0.1% to 7.1818 per U.S. dollar, though gains were capped by the still-fragile truce in the U.S.-China trade war and the uncertainty surrounding the next moves of the two countries.

Barclays sees plenty of headwinds over the medium term that could push the currency back onto a depreciation path, even if it might gain a little further from below 7.20.

Source: BNN BIoomberg

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Gerik

Economic

Strategic Trade Setup Reflects Confidence in India's Macroeconomic Stability

Goldman Sachs’ trading desk has proposed a nine-month binary put option on the USD/INR pair, struck at 83 — a level that implies a nearly 3% appreciation of the rupee from its current level of around 85.50. Binary options are unique in that they offer an all-or-nothing payout if the rupee reaches or strengthens beyond that level by the contract’s expiry, in this case by March 2026. This timing aligns with seasonal rupee strength commonly observed toward India’s fiscal year-end.

The choice of a binary put signals Goldman’s conviction in a decisive break below the strike price rather than a gradual strengthening. It also minimizes exposure to volatility during the life of the trade, focusing only on the final settlement value, making it a cost-efficient expression of a directional view.

Improved Growth and Capital Flows Reinforce Bullish Sentiment

India's GDP growth of 7.4% in the March quarter — up from 6.4% in the previous period — suggests broad-based economic momentum. This uptick is supported by Goldman's internal activity tracker showing robust consumer spending into April. Such momentum is a key signal for foreign investors, who have already poured over $4 billion into Indian equities in the last two months. If this trend continues, the rupee will benefit from increased demand in the foreign exchange market.

Moreover, earnings growth among Indian corporates and rising investor confidence are aligning to create a pro-risk appetite that favors currency appreciation.

Geopolitics and Commodities Offer Additional Tailwinds

Another important factor in the trade setup is the expectation of easing trade tensions between India and the U.S. Goldman sees the prospect of a U.S.-India trade agreement as a possible catalyst for rupee strength. A de-escalation of reciprocal tariffs, particularly the paused 26% levy on Indian shipments, would boost both capital sentiment and trade flows, strengthening the rupee.

Lower oil prices are another pillar supporting this thesis. Brent crude is projected by Goldman to average $60 in H2 2025 and drop further to $56 in 2026. This would ease India’s import bill, improve the current account balance, and reduce the need for dollar purchases by oil companies, all of which point toward INR appreciation.

Currency Lag and Catch-Up Potential

Despite these improving fundamentals, the rupee has underperformed relative to other Asian currencies, even as the U.S. dollar index fell by over 9% in recent months. This divergence suggests potential catch-up gains for the INR, should market expectations realign with macroeconomic reality.

However, the binary nature of the option also implies that the trade could expire worthless if USD/INR fails to drop below 83, even marginally. Key risks include renewed global risk aversion, domestic political instability, or a surprise spike in oil prices — any of which could limit rupee gains or push the currency back into depreciation territory.

Goldman Sachs’ options bet on the rupee reflects a calculated optimism about India's economic trajectory and its currency’s underperformance in 2025. By targeting the 83 level with a binary put, the strategy expresses a high-conviction view with a defined risk-reward profile. Investors considering similar exposure must weigh macro tailwinds against potential shocks, but the broader case for rupee appreciation appears supported by solid fundamentals and improving capital market dynamics.