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It was another strong week for the Swiss franc as risk-off flows on trade tensions kicked in while the euro had one of its mixed runs. Can the ECB decision change that?

Euro zone flash CPI (June 4, 9:00 am GMT)

European data will be easing in early in the week, starting off with a batch of low-tier final PMI readings from its top economies. Price action might get a bit more exciting once the flash CPI readings are released on Tuesday’s London session.

The flash headline CPI is projected to have fallen from 1.7% to 1.4% in May while the core version of the report likely slipped from 1.3% to 1.0%. Keep in mind, however, that the April inflation readings were mostly shored up by the strong rally in energy prices then, so the dip last month might not be too surprising.

Still, much weaker than expected results would underscore the persistent weakness in the euro zone economy – something that might fuel easing expectations for the central bank sooner or later.

ECB monetary policy statement (June 6, 11:45 am GMT)

On the subject of monetary policy, the ECB will be making its decision on interest rates and asset purchases by Thursday. No actual changes are expected for now, but traders are likely to pay close attention to adjustments in economic forecasts.

Economic reports continued to reflect weakness in the bloc, and it doesn’t help that recent world developments don’t paint an upbeat picture either. For one, the possibility of a “no deal” Brexit has been heightened on PM May’s resignation. To top it off, the end of the tariffs truce between the U.S. and China threatens to extend the ongoing global slowdown.

All these might be enough for ECB policymakers to adjust their forward guidance to signal openness to lower rates further or expand their loan programs to provide more stimulus. The central bank is also set to give more details on their current TLTRO schemes.

Overall market sentiment

Trade tensions have been the primary driving factor of market sentiment in the past few weeks, and the Swiss franc has been one of the main beneficiaries.

Higher Chinese tariffs on $60 billion worth of U.S. goods have already taken effect on June 1, following the Trump administration’s increased duties on $200 billion worth of Chinese imports. China also plans on restricting exports of rare earth materials, which are essential to U.S. tech, autos, and consumer goods.

To top it off, the Donald has also decided to ramp up tariffs on Mexico, and this might wind up hurting profitability for several U.S. businesses as well.

With that, market watchers are likely to keep their eyes and ears peeled for headlines related to this trade mess. Escalating tensions might keep risk aversion in play, possibly keeping lower-yielding currencies like the franc supported.

Missed last week’s price action? Read the EUR & CHF price review for May 27-31!