Swiss Franc Rises Sharply Amid Middle East Tensions; EUR/CHF in Short-Term Correction?

Swiss Franc is having a significant surge today, likely due to flight to safe-haven assets amid rising tensions in the Middle East. Reports have emerged that Israeli military tanks were seen in central Rafah for the first time since the Israel Defense Forces entered the city earlier this month. This movement follows a recent missile strike by Israel on a displacement camp near Rafah, contributing to the heightened geopolitical uncertainty.

In response to these developments, gold prices edges higher, reflecting increased investor caution. Concurrently, WTI crude oil prices are rebounding toward 80 per barrel, indicating a partial recovery amid the volatile geopolitical picture.

Overall in the forex markets, New Zealand Dollar and Australian Dollar are also showing strength, trailing Swiss Franc. On the other hand, Dollar is the weakest performer today, followed by Canadian Dollar and Euro. Japanese Yen and British Pound are trading in a more neutral position.

Technically, break of 0.9880 minor support will indicate short term topping in EUR/CHF at 0.9928. Deeper correction would be seen back to 38.2% retracement of 0.9563 to 0.9928 at 0.9789, which is inside 0.9728/9835 support zone.

In Europe, at the time of writing, FTSE is down -0.47%. DAX is down -0.39%. CAC is down -0.80%. UK 10-year yield is down -0.003 at 4.262. Germany 10-year yield is up 0.008 at 2.564. Earlier in Asia, Nikkei fell -0.11%. Hong Kong HSI fell -0.03%. China Shanghai SSE fell -0.46%. Singapore Strait Times rose 0.35%. Japan 10-year JGB yield rose 0.0148 to 1.040.

ECB: Consumer inflation expectations reach lowest level since Sep 2021

ECB Consumer Expectations Survey for April shows a slight decline in inflation expectations and a modestly improved economic outlook.

Median inflation expectations for the next 12 months have decreased to 2.9%, down from 3.0%, reaching their lowest point since September 2021. Similarly, expectations for inflation three years ahead have dropped to 2.4% from 2.5%.

Regarding economic growth, the survey highlights less pessimistic view for the coming year. Median expectation for economic growth over the next 12 months has improved to -0.8%, compared to -1.1% in March.

Fed’s Kashkari: More positive inflation data needed before easing monetary policy

In an interview with CNBC today, Minneapolis Fed President Neel Kashkari emphasized the need for “many more months of positive inflation data” before considering a reduction in monetary policy restrictions.

Moreover, he noted that Fed might still need to hike rates if inflation does not decrease further, stating, “I don’t think we should rule anything out at this point.”

Kashkari expressed confidence that Fed would eventually achieve its 2% inflation target but cautioned against rushing into rate cuts. However, “I’m not seeing the need to hurry and do rate cuts. I think we should take our time and get it right,” he added.

Japan’s CSPI rises 2.8% yoy in Apr, highest annual increase since 2015

Japan’s Corporate Service Price Index saw a notable increase of 2.8% yoy in April, surpassing the expected 2.3% yoy and accelerating from 2.4% yoy in the previous month. This marks the fastest annual rise since March 2015. On a monthly basis, service prices rose 0.7% mom from March, though this was a slight slowdown from the prior month’s 0.9% mom increase.

The significant annual gains can be attributed to rising labor costs in labor-intensive service sectors, particularly in areas such as machine repair and industrial facility renovation. This surge in service prices highlights the growing cost pressures within Japan’s service industry, driven by an tight labor market.

Australia’s retail sales rises 0.1% mom in Apr, weak consumer spending continues

Australia’s retail sales rose by 0.1% mom to AUD 35.7B in April, falling short of the expected 0.3% mom increase. This modest rise followed a -0.4% mom decline in March, indicating continued weakness in consumer spending.

Ben Dorber, ABS head of retail statistics, commented, “Underlying retail spending continues to be weak with a small rise in turnover in April not enough to make up for a fall in March.”

He further noted that “since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending.”

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9128; (P) 0.9141; (R1) 0.9151; More….

USD/CHF’s retreat from 0.9157 extends lower but stays above 0.9077 minor support. Intraday bias remains neutral and another rise is in favor. On the upside, above 0.9157 will bring retest of 0.9223. However, on the downside, break of 0.9077 will suggest that rebound from 0.8987 has completed. Intraday bias will be turned back to the downside for 0.8987 support. Further break there will resume the fall from 0.9223 to 38.2% retracement of 0.8332 to 0.9223 at 0.8883.

In the bigger picture, price actions from 0.8332 medium term bottom are tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Rejection by 0.9243 resistance, followed by sustained break of 38.2% retracement of 0.8332 to 0.9223 at 0.8883 will strengthen this case, and maintain medium term bearishness. However, decisive break of 0.9243 will argue that the trend has already reversed and turn medium term outlook bullish for 1.0146..

Economic Indicators Update