US 10YR FUTURE TECHS: (Z5) Northbound

Following the US's announcement of 39% tariffs on Swiss imports, Bank of America think "the options available to the Swiss appear limited and it is unclear whether these will appease the U.S." as opposed to a complacent-appearing market which believes "that a deal will be struck in line with precedent of other negotiations".

• This leads them to conclude that if announced tariff levels would in fact remain in play, they "doubt that [an SNB] move into negative territory is the solution [...]. The more impactful policy lever would be to absorb the tariff rate via a weaker currency. This has been a path trodden by other economies in the past notably China."
• "SNB itself has history of attempting to weaken the currency via the EUR/CHF 1.20 floor. The net result in our view is that 39% tariff which cannot be negotiated downwards would lead to a structurally weaker currency, in large part driven by SNB action."

EUR edges to the best levels of the day into the NY crossover, with a sizeable upturn in EUR futures volumes at 1107BST/0607ET the likely driver. No notable newsflow or headlines crossing to trigger the move, and cross-market prices also relatively subdued.

• Just shy of $200mln notional traded on the initial EUR rally - helping push EUR/USD spot now through the 1.1600 handle for a new weekly high. Break of resistance into the post-NFP high at 1.1597 also helping here - and spot now within range of a sizeable option expiry (€1.1bln) rolling off at 1.1600 today.
• This tips EUR/JPY to new daily highs - but progress above 171.85 is needed before the late July highs can come into play.