- US markets closed for a holiday
- US debt ceiling crisis resolved
- US inflation higher than expected
- Switzerland releases GDP and the KoF Economic Barometer
The Swiss franc has edged higher on Monday and is trading at 0.9036, up o.15%. US markets are closed for Memorial Day and the currency markets have been calm today.
Switzerland releases GDP and business confidence on Tuesday. The Swiss economy has been weak and first-quarter growth is expected to inch up to 0.1% q/q, up from zero in Q4 2022. The KoF Economic Barometer, which measures business confidence, has slowed for two straight months and is expected to fall from 96.4 to 95.0 points.
US debt ceiling crisis avoided
The US debt ceiling crisis appears to be over, after weeks of difficult negotiations between Republicans and Democrats. The US has never defaulted on its debt, so one could argue that the crisis was manufactured by lawmakers who were intent on playing a high-stakes game of brinkmanship. Some lawmakers may oppose the deal, but both houses of Congress are expected to rubber-stamp the agreement.
The uncertainty surrounding the debt ceiling unnerved the markets, causing risk sentiment to fall, as US yields and the US dollar moved higher. There’s little movement in the markets today with US markets closed, but we could see a reaction to the debt ceiling agreement on Tuesday.
Sticky inflation could force Fed to hike in June
Will June bring another rate hike from the Fed? Just a few weeks ago, the markets had projected a pause at 64%, but that has changed due to hawkish messages from the Fed and higher-than-expected inflation on Friday. Headline PCE price index climbed 0.4% on the month, versus an estimate of 0.0%, while the core reading jumped 0.8%, double the estimate.
The markets have now priced a 25-basis point hike at 64%, with a 36% probability of a pause, according to CME’s FedWatch. The US economy has remained surprisingly strong in the face of rising hikes and the Fed may have to tighten further, complicating its hopes of a soft landing for the economy.
- USD/CHF is putting pressure on support at 0.9022. Below, there is support at 0.8969
- 0.9103 and 0.9156 are the next resistance lines
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