STIR: Markets Shrugged Off Strong GDP/IP Ahead Of Schlegel
Dovish moves in EUR FI have filtered through to Franc-denominated markets over the last three days despite strong activity data in Switzerland - strengthening the narrative that markets view the SNB as more concerned with its inflation and FX outlook than immediate growth worries.
- CHF OIS markets currently price 48bp of easing through Dec - up from 37bp on Tuesday (hawkish extreme after Monday's US/China tariff reprieve). For the upcoming June SNB meeting, markets imply around a 1/5 chance of an outsized 50bp cut to -0.25%.
- While today's Q1 Swiss IP data underscored that the sector likely benefited strongly from US tariff-front running in the pharma sector, yesterday's Swiss Q1 flash GDP reading mentioned that the 0.7% Q/Q figure was "driven significantly by the services sector", limiting the threat for an outsized pharma-driven reversal in Q2.
- SNB Chairman Schlegel is scheduled to hold a speech at 1200BST titled "trade war and geopolitical upheaval: Monetary policy in times of uncertainty". Most interesting would be any update on his recent commentary that the Swiss Franc has "really appreciated a lot".
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US-JAPAN: Trump To Attend Meeting w/Japan's Chief Trade Negotiator
President Donald Trump posts on Truth Social: "Japan is coming in today to negotiate Tariffs, the cost of military support, and “TRADE FAIRNESS.” I will attend the meeting, along with Treasury & Commerce Secretaries. Hopefully something can be worked out which is good (GREAT!) for Japan and the USA!". As the first country to come to the US for negotiations following the suspension of 'reciprocal' tariffs, the meeting will be watched closely not just in Tokyo, but in the capitals of other US allies for signs of how the Trump administration will treat its friends when it comes to trade talks.
- As the FT reports "Diplomats said Japan’s status as a “guinea pig” in trade talks might give it an advantage over other countries, but also made it a test case of just how hard the US administration was prepared to hit friends and foes. Japan’s trade surplus with the US is among the 10 biggest in the world."
- Bloomberg reports that Treasury Sec Scott Bessent and USTR Jamieson Greer are keen to discuss currency issues. However, Japan's Economic Revitalisaiton Minister and chief trade negotiator Ryosei Akazawa does not have the currency portfolio under his command. Instead, this is managed by Finance Minister Katsunobu Kato.
- Earlier in the week, Japanese PM Shigeru Ishiba said in a parliamentary committee session that "We do not intend to make one compromise after another to conclude negotiations swiftly," potentially indicating of a hard-line stance to be adopted by the Japanese negotiators.
LOOK AHEAD: Wednesday Data Calendar: Retail Sales, IP/Cap-U, Fed Chair Powell
- US Data/Speaker Calendar (prior, estimate)
- 16-Apr 0700 MBA Mortgage Applications (20.0%, --)
- 16-Apr 0830 Retail Sales Advance MoM (0.2%, 1.4%), Ex Auto (0.3%, 0.4%)
- 16-Apr 0830 Retail Sales Control Group ((1.0%, 0.6%)
- 16-Apr 0830 NY Fed Services Business Activity (-19.3, -12.1)
- 16-Apr 0915 Industrial Production MoM (0.7%, -0.2%)
- 16-Apr 0915 Capacity Utilization (78.2%, 77.9%)
- 16-Apr 0915 Mfg (SIC) Production (0.9%, 0.2%)
- 16-Apr 1000 Business Inventories (0.3%, 0.2%)
- 16-Apr 1000 NAHB Housing Market Index (39, 38)
- 16-Apr 1130 US Tsy $60B 17W bill auction
- 16-Apr 1200 Cleveland Fed Hammack moderated Q&A w/ text
- 16-Apr 1300 US Tsy $13B 20Y Bond reopen (912810UJ5)
- 16-Apr 1330 Fed Chair Powell Economic Club of Chicago, outlook (text, Q&A)
- 16-Apr 1600 Net Long-term TIC Flows (-$45.2B, --); Total Flows (-$48.8B, --)
- 19-Apr 1900 KC Fed Schmid & Dallas Fed Logan on economy (no text, Q&A)
