SWITZERLAND DATA: June CPI Preview - Few Idiosyncratic Factors
Swiss headline inflation (released 0730BST/0830CET) is expected to have remained steady on a Y/Y basis for the second consecutive time, with consensus standing at +1.4% Y/Y and +0.1% M/M (vs +1.4% and +0.3% in May, respectively). Core CPI is expected to have accelerated slightly, however - consensus stands at +1.3% Y/Y (vs +1.2% May).
- A print in line with consensus would bring in overall Q2 inflation at 1.4%, matching the SNB June meeting forecast. Looking further ahead, the SNB projects inflation to accelerate slightly, to 1.5% Y/Y in Q3.
- There seem to be few idiosyncratic drivers with a clear upward/downward impact on the yearly rate for this release. Rental prices will not see an index update in June, and FX risk on imported inflation appears subdued. As such, the release will provide a good view of the development of underlying inflationary pressures, which were central to the June cut.
- The range of estimates are smoothly distributed - out of 18 estimates, 3 are looking for 1.5% Y/Y headline, 11 for 1.4%, and the remaining 4 for 1.3%. For the core rate, 4 submissions are looking for 1.3% and one for 1.2%.
- SNB President Jordan mentioned in the June press conference that lower-than-expected second-round effects drove these diminishing inflationary pressures. As second-round effects appear prominently in the services sector, respective subcategories might be a good focus point potentially informing further SNB action. Specifically, Jordan mentioned tourism services in this context.
- Analyst views on the release remain sparse. Nomura have noted in their review of the June meeting that they are expecting even lower second-round effects than the SNB - that might have been a driver behind their lower-than-consensus estimate for this month's inflation round.
MNI, SECO, Bloomberg
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SWITZERLAND DATA: May CPI Preview - Housing & Imported Inflation Focus Again
Swiss CPI is due for release at 7:30BST / 8:30CET. Headline inflation is expected to have remain steady on a Y/Y basis in May after April's pronounced uptick, with consensus standing at +1.4% Y/Y and +0.3% M/M (vs +1.4% and 0.3% in April, respectively). Core CPI is expected to have accelerated further, however - consensus stands at +1.3% Y/Y (vs +1.2% Apr).
- A headline print in line with consensus would bring in the Q2 average to date in line with the SNB forecast of 1.4% ahead of the SNB's policy decision on June 20th.
- SNB President Jordan mentioned "small" upside risks to that forecast in a recent speech, though. Of course, these upside risks could also materialize after the SNB meeting, as part of the June inflation print.
- Two categories appear to be in focus again in May: Imported inflation and housing inflation.
- Imported inflation was the upside driver behind April's uptick amid CHF depreciation which started at the beginning of February, implying broadly a 2-month lag. As the Franc depreciated further in March, we see no obvious reason why this uptick in imported inflation should reverse in May.
BTP TECHS: (M4) Bear Threat Remains Present
- RES 4: 120.28 High Mar 14 and the bull trigger
- RES 3: 119.55 High Mar 27
- RES 2: 119.00 High May 16 and a key near-term resistance
- RES 1: 117.57 50-day EMA
- PRICE: 117.20 @ Close Jun 3
- SUP 1: 116.08 Low May 29
- SUP 2: 115.76 Low Apr 25 and the bear trigger
- SUP 3: 115.70 Low Dec 8 ‘23 (cont)
- SUP 4: 114.74 1.236 proj of the Dec 27 - Feb 22 - Mar 14 price swing
BTP futures traded sharply lower last week and in the process cleared support at 116.94, the May 15 low. The move down strengthens a bearish threat and a continuation would open 115.76, the Apr 25 low and a bear trigger. Clearance of this level would highlight an important technical break. On the upside, initial resistance is at 117.57, the 50-day EMA. Firmer resistance is seen at 119.00, the May 16 high.
FOREX: BBDXY Off Lows, CHF CPI Eyed
The broader USD (BBDXY) sits a little above both its Monday and Asia-Pac lows, after reversing early Asia weakness.
- A reminder that the PCE and ISM m’fing data seen over the past couple of sessions has helped limit USD rallies, with a modest dovish shift in FOMC-dated OIS leaving ~40bp of ’24 cuts priced.
- Little cue from equities in Asia, with regional benchmarks either side of unchanged and e-minis essentially flat as London participants join.
- The CHF marginally outperforms most G10 peers ahead of this morning’s Swiss CPI data. CHF TWI has recovered from ’24 lows, with SNB Chair Jordan’s warning on the potential need to sell FX and “small” upside risks to the Bank’s inflation forecasts supporting in recent days. CHF May headline CPI readings are seen steady at +1.4% Y/Y and +0.3% M/M.
- USD/JPY traded between 155.99-156.49 in Tokyo, with yesterday’s low respected. Finance Minister Suzuki warned on the economic impact of significant cuts to car production, while also noting that recent JPY intervention had some effects on the market. Elsewhere, RTRS reported that “Japan's government will warn of the pain a weak yen may inflict on households in this year's long-term economic policy roadmap,” citing a draft they have seen.
- AUD finds itself at the foot of the G10 FX table, with a surprise current account deficit applying some limited pressure.
- NZD also struggles against most G10 peers on AUD spill over.
- Swiss CPI, along with U.S. JOLTS and factory orders data, provide the risk events of note today.
