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The pound had a weak start but it fired its booster rockets and surged across the board, thanks to the BOE’s hawkish surprise. Italy-related worries, meanwhile, apparently gave the euro a good whipping.

  • Swiss trade balance: CHF 2.76B vs. CHF 1.89B expected, CHF 2.24B previous
  • SNB Libor rate: unchanged at -0.75% as expected
  • SNB sight deposits rate: unchanged at -0.75% as expected
  • The Swissy “remains highly valued” according to SNB
  • U.K. public sector net borrowing: £3.4B vs. £5.1B expected, 5.3B previous
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B
  • 6-3 vote to keep the Bank Rate at 0.50% (7-2 vote was expected)
  • Ian McCafferty and Michael Saunders voted for a rate hike (again)
  • BOE Chief Economist Andy Haldane joined the rate hike team

Major Events/Reports:

Italy-related update

According to a Reuters report, Claudio Borghi and Alberto Bagnai were chosen to respectively head the Budget Committee in the Chamber of Deputies and the Finance Committee in the Senate.

Unfortunately for investors, pro-EU people, and euro bulls, those two are well-known euroskeptics (especially Bagnai), so the news was not too well received.

SNB monetary policy decision

As widely expected (and as usual), the Swiss National Bank (SNB) announced no changes to its current monetary policy.

As such, the target range for the Libor rate is still between -1.25% and -0.25%, with the median target rate at -0.75%. The interest rate on sight deposits was also unchanged at -0.75%.

And while the SNB acknowledged that “the value of the Swiss franc has barely changed since the monetary policy assessment of March 2018,” the SNB still thinks that the Swissy “remains highly valued.”

The SNB also noted that the forex market “remains fragile.” As such, the SNB renewed its pledge (or threat) to “intervene in the foreign exchange market as necessary,” since sneakily weakening the Swissy (*cough* currency manipulator *cough*)  and the SNB’s negative rates are “essential” to “keep the attractiveness of Swiss franc investments low and ease pressure on the currency.”

Other than that, the SNB also downgraded its inflation forecasts, which further stresses the SNB’s stubborn position that monetary policy ain’t changing anytime soon.

SNB’s Jordan speaks

SNB Overlord Thomas Jordan had a presser shortly after the SNB’s monetary announcement.

And he tried to paint to dovish picture by saying that:

“The risks [to the Swiss economy] are more to the downside, reflecting the more difficult political situation in Italy which had a big impact on international financial markets.”

And with regard to monetary policy, Jordan merely reiterated (as usual) that the SNB is in no rush to change its monetary policy, while specifically taking the Swissy’s exchange rate into consideration.

“We will adjust our monetary policy at the point when it is necessary. But it is of no use to change monetary policy too early in order to provoke an appreciation in the Swiss franc and then we will again have monetary conditions which are too tight.”

MPC monetary policy decision and minutes

The BOE’s MPC announced their latest monetary policy decision and released the minutes for their latest monetary policy huddle late into the session. And as usual, below are some of the more important and/or interesting points in, well, bullet points for easier reading:

  • The MPC voted to maintain the BOE’s current monetary policy
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B
  • 6-3 vote to keep the Bank Rate at 0.50% (7-2 vote was expected)
  • Ian McCafferty and Michael Saunders dissented by voting for a rate hike (again)
  • BOE Chief Economist Andy Haldane joined the rate hike team
  • The three MPC members dissented because they “had a higher degree of confidence that the slowdown in Q1 was temporary or erratic and would largely be unwound.”
  • Also, the three MPC members think that “the most recent indicators of labour demand and pay settlements indicated some upside risks to the expected pickup in average weekly earnings and unit wage cost.”
  • And while the others did note vote for a hike, they still have a hiking bias since “an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon.”
  • However, “All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
  • Also, those who voted not to hike think “that the softness of activity in the first quarter had been largely temporary.”
  • Other than that, “the MPC now intends not to reduce the stock of purchased assets until Bank Rate reaches around 1.5%, compared to the previous guidance of around 2%.”
  • In other words, the BOE is saying that it may unwind its bond holdings earlier.

Risk-off vibes in Europe

The major European equity indices had a promising start, but is soon became clear that the risk aversion was the dominant sentiment since the major European equity indices began to slip into negative territory as the session progressed.

Market analysts blamed the risk-off vibes on Daimler’s profit warning due to Trump’s tariffs, which caused other auto shares to fall and then soured overall risk sentiment.

To that I would add political worries in Italy since the major European equity indices began to encounter fresh selling pressure when news about Claudio Borghi and Alberto Bagnai being appointed began to make the rounds.

  • The pan-European FTSEurofirst 300 was down by 0.35% to 1,497.45
  • Germany’s DAX was down by 0.84% to 12,587.33
  • The blue-chip Euro Stoxx 50 was down by 0.65% to 3,423.75

The risk-off vibes in Europe also caused U.S. equity futures to slip into the red.

  • S&P 500 futures were down by 0.12% to 2,768.75
  • Nasdaq futures were down by 0.04% to 7,310.25

Major Market Mover(s):


The pound was broadly weaker in the run-up to the BOE statement. However, the BOE statement gave some hawkish surprises, causing the pound to spurt higher and claim the top spot during the morning London session.

GBP/USD was up by 85 pips (+0.64%) to 1.3215 after reaching an intraday low of 1.3102, GBP/JPY was up by 83 pips (+0.58%) to 146.07 after reaching an intraday low of 144.59, GBP/CAD was up by 113 pips (+0.64%) to 1.7601 after reaching an intraday low of 1.7455


The euro was already feeling some bearish pressure at the start of the session.

However, the euro later got a really good thrashing when word got around that Claudio Borghi and Alberto Bagnai were chosen to be the Budget Committee Head and Finance Committee Head respectively.

In other words, political uncertainty and Italy-related worries kicked the euro lower.

EUR/USD was up by 18 pips (-0.16%) to 1.1541, EUR/NZD was up by 69 pips (-0.41%) to 1.6827, EUR/GBP was up by 56 pips (-0.65%) to 0.8734

Watch Out For:

  • 12:30 pm GMT: Philadelphia Fed manufacturing index (28.9K expected vs. 34.4 previous)
  • 12:30 pm GMTL Initial jobless claims in the U.S. (220K expected vs. 218K previous)
  • 12:30 pm GMT: ADP’s Canadian non-farm employment change (30.2K previous)
  • 12:30 pm GMT: Canadian wholesale sales (0.4% expected vs. 1.1% previous)
  • 1:00 pm GMT: U.S. HPI (0.3% expected vs. 0.1% previous)
  • 2:00 pm GMT: Euro Zone consumer confidence (no change from 0 expected)
  • 2:00 pm GMT: CB’s U.S. leading index (0.4% expected, same as previous)
  • 8:15 pm GMT: BOE Guv’nah Mark Carney will speak