SWITZERLAND DATA: Feedthrough Questionable If Services CPI Comes Higher in April
Swiss April CPI is scheduled to be published today, 07:30 BST / 08:30 CEST, with consensus for the headline measure standing at 0.2% Y/Y (0.3% prior) and 0.2% M/M.
- An inline headline print at 0.2% Y/Y would be the lowest since March 2021 - and would mean Swiss inflation starts off the quarter not far off the 0.3% Q2 average SNB inflation forecast.
- Core CPI consensus stands at 0.8% Y/Y (0.9% prior).
- Eurozone April core inflation notably surprised to the upside today, and national-level data released through this week pointed towards one-off Easter Effects (easter holidays were in April this year, as opposed to last year, filtering through to a higher Y/Y in travel-related services) having contributed towards this 'beat' - we would not be surprised if a similar trend will also be observable in Switzerland this time. Thus, in case of a higher services rate (March 1.58% Y/Y), focus should be on how much travel-related services (package holidays, airfares, hotels) were behind that.
- The SNB seems likely to look through a potential temporarily higher services Y/Y rate given their wariness of downside growth risks following US tariffs and subdued headline inflation in Switzerland. Thus, it remains questionable if a higher-than-expected CPI print in April would be able to materially shift market pricing for the next SNB meeting in June - a 25bp cut is fully priced as of now.
- UBS expects 0.1% Y/Y headline in April:
- "A decline in energy prices (-1.7pp to -8.5% y/y) to be the key driver of the fall in headline"
- "Food and our definition of core inflation (headline excl. energy and food) are also expected to decline -0.4pp to -0.6% y/y and -0.1pp to 0.9% y/y"
- "Swiss inflation to hover around 0.1% y/y over the coming months with risks firmly skewed to the downside amid the recent sharp appreciation of the CHF."
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AUSSIE 10-YEAR TECHS: (M5) Strong S/T Bounce
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.915 - High Apr 4
- PRICE: 95.860 @ 16:42 GMT Apr 04
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
USDCAD TECHS: Bearish Structure
- RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 3: 1.4415 High Apr 1
- RES 2: 1.4308 50-day EMA
- RES 1: 1.4242 High Apr 4
- PRICE: 1.4196 @ 17:10 BST Apr 4
- SUP 1: 1.4028 Low Apr 3
- SUP 2: 1.3986 Low Dec 2 ‘24
- SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD rallied Friday, but remains lower on the week after Thursday’s downleg. The move down has confirmed a clear reversal of the bull cycle between Sep 25 ‘24 and Feb 3. Price is through a key support at 1.4151, the Feb 14 low. This signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4308, the 50-day EMA.
CANADA DATA: Unexpected Jobs Contraction Boosts Implied April BOC Cut Chances
Canadian employment unexpectedly contracted in March, falling by the most since January 2022 at -32.6k (+10.0k expected, +1.1k prior) in a sign that the trade war with the US is spilling over increasingly into the "hard" data. The unemployment rate ticked up 0.1pp to 6.7%, in line with expectations and below the November 6.9% high, though unrounded it rose from 6.55% to 6.71% - the largest increase since November.
- The drop in employment was largely due to a 62.0k drop in full-time positions (after -19.7k, the 2nd straight drop), with part-time up for the 4th consecutive month at 29.5k (after 20.8k prior) - that mix is clearly indicative of hiring uncertainty among firms.
- The monthly full-time drop was the 2nd largest since the pandemic lows in the labour market (April 2020). Goods producing jobs fell by 12k (2nd consecutive decline), while services shed 21k (wholesale/retail trade and Information, culture and recreation led losses).
- The participation rate dipped 0.1pp to 65.2%.
- Wages were soft, dropping 0.2% M/M for the first drop since November, with the Y/Y rate slipping to 3.6% from 3.8% prior. The rise in permanent employees' wages of 3.5% Y/Y was well below the 4.1% expected (4.0% prior).
- Market-implied probability of an April BOC rate cut rose to as high as 68% after the data before settling the day at around 55%. That compares to 40% prior to Wednesday's US tariffs announcement.
