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Investors expect a 5% rise in Q2 earnings and a 3.9% increase in revenue, indicating deceleration.
In the second quarter, earnings are expected to grow by 5% compared to last year, thanks to a 3.9% rise in revenues. This growth is the slowest we’ve seen since a 4.3% increase in the third quarter of 2023.
Earnings estimates for Q2 2025 are falling, with significant cuts in 14 out of 16 Zacks sectors. The Aerospace and Utilities sectors are the only exceptions showing increases. Meanwhile, the Tech and Finance sectors—making up over 50% of the S&P 500 earnings—are also experiencing estimate cuts, though Tech has stabilized recently.
In early European trading, Eurostoxx, German DAX, and UK FTSE futures were down.
Eurostoxx futures have fallen by 0.4% as trading begins in Europe, reflecting cautious sentiment. German DAX futures are also down 0.4%, while UK FTSE futures have dropped by 0.3%.
Market responses seem mild. Initially, S&P 500 futures fell by about 1% but have since recovered slightly, now down just 0.1% for the day.
Iranian Response Focus
Attention now shifts to how Iran might respond after the US military targeted its nuclear facilities over the weekend. President Trump stated that the strikes caused “monumental damage” and hinted at potential regime change in Iran. This contrasts with earlier official statements that focused on disarming Iran without affecting its political situation. Today’s cautious start in Europe, with minor declines in futures, indicates that traders are taking a breath and reassessing rather than rushing to act. The 0.4% drop in Eurostoxx and DAX futures, along with a 0.3% decline in FTSE futures, do not signal panic or significant shifts in market positions. Instead, they show a collective pause; markets are aware of geopolitical events but are not reacting excessively. In the US, the S&P 500 futures initially dropped sharply but saw a gradual recovery. The bounce from a 1% decline to a 0.1% drop suggests that traders initially priced in increased risks and later recalibrated, recognizing the limited immediate impact. The weekend airstrike, which reportedly damaged Iran’s nuclear sites, has important political and security implications. However, instead of a broad interpretation, the market appears to be carefully analyzing the situation. Trump’s comments have pointed toward significant outcomes, while previous government statements focused more on military capabilities.Trading Strategies and Risk Management
This indicates that while the gap between rhetoric and the official stance is being acknowledged, it hasn’t triggered major position changes. This is important because the clarity of communication can significantly influence risk management in trading. Inconsistent messaging makes it challenging to trust headline figures, leading traders to adopt tactical strategies instead of broader strategic shifts. Traders have mostly avoided liquidating their positions. This suggests a belief that, despite current tensions, the chance of widespread instability affecting markets in the near term is not seen as likely. For those dealing with derivatives, especially index-linked contracts, the current market favors quick adjustments over long-term directional bets based on geopolitics. Volatility pricing hasn’t skyrocketed—if anything, it remains at levels suggesting that optionality is reasonably priced. This allows traders to explore spread strategies or take limited-risk positions ahead of significant policy announcements. Keep an eye on how futures respond to key headlines in the coming week. If military rhetoric continues without noticeable escalation or retaliation from Iran, we may see volatility drop sharply. Short-term risk now centers on overnight news. This indicates that intraday movements may not last unless supported by further developments. Thus, tight stop levels and option overlays may help in managing position risks while leaving room for opportunities. For now, the focus should be on reacting to volume changes rather than just headline news. Create your live VT Markets account and start trading now.Oil prices rise as traders evaluate the effects of Iran-Israel tensions on the market
Oil prices are climbing due to recent tensions between Iran and Israel. WTI crude rose to $77 after the US took action against Iranian nuclear sites but has since stabilized, showing a daily increase of 1%. This conflict is causing more market volatility as traders consider how it might affect oil supply, particularly through the Strait of Hormuz.
Despite being a significant OPEC producer, Iran’s influence in the region has weakened over time. Threats to close the Strait of Hormuz have not led to major disruptions in the past, mainly because of the military presence from countries like the US.
The fear of a “worst-case scenario” might cause sudden spikes in prices. However, if prices reach $90 or $100 per barrel, traders may see this as a chance to short, given existing market trends. Previous supply issues have often been overstated, and while current geopolitical tensions are serious, they may not lead to a long-lasting increase in prices.
Currently, oil prices are stabilizing between $66 and $80. Any overly dramatic response to potential disruptions could be viewed as a selling opportunity, following the strategy of “buy value, sell hysteria.” The market is aware of possible disruptions but is responding with caution.
Essentially, this situation highlights the balance between perception and reality. The initial rise in oil prices, prompted by recent military actions, is not surprising. When there are reports of threats to supply routes in politically sensitive areas, markets often react quickly. We’ve seen this pattern—news breaks, futures rise, and volatility heightens. However, actual disruptions to output or transport rarely occur immediately.
It’s important to note that oil prices, despite sensational headlines and geopolitical drama, are staying within a familiar range. This suggests that while concerns are present, there hasn’t been significant action regarding real supply constraints. Market participants are reacting but not overreacting—at least not on a large scale.
Understanding that emotional responses don’t always lead to long-term price changes is crucial. Short-term spikes driven more by fear than fundamentals often don’t last. Yes, the Strait of Hormuz is vital—about one-fifth of global oil flows through it—but history shows that significant blockages don’t happen easily. This historical context influences current pricing.
When we consider all these factors, it becomes clear that any sudden price increase, especially at the upper end of recent movements, may be more of a chance to exit than to enter. If WTI crude approaches or exceeds $90 without real backing, we would see it as ripe for a potential reversal. This view stems from historical trends, which indicate a lack of sustained price increases without actual supply cuts.
Traders should remember the importance of timeframes. Short-term futures often quickly correct themselves if the initial drivers of price changes don’t pan out. This creates opportunities when trading volume grows disproportionately compared to actual shifts in crude fundamentals.
During conflicts, optionality increases. Premiums rise not because blockages are guaranteed, but due to hedging against risks. When volatility spikes ahead of actual outcomes, strategies that profit from time decay without taking sides can be effective. These strategies tend to perform well when expectations move ahead of actual volatility.
The pattern is evident: markets are factoring in fear but not necessarily forthcoming consequences. The more limited the physical response, the less sustainable the price increase. Recent attempts to push beyond higher levels have often failed unless supported by real reductions in output or supply.
This market environment favors a strategy that capitalizes on reverting trends rather than chasing breakouts. Monitoring sentiment indicators, such as COT reports and options skew, is crucial. These indicators often adjust faster than spot prices and can signal when positioning becomes overly one-sided.
Volatility, while high, remains orderly, which is significant. It suggests that there is no panic, but there is caution. In this context, fading extremes when sentiment peaks can be a reliable strategy. New long positions should only be considered when there is a substantial shift, not just noise.
For those looking at the technical side, the repeated rejection near the upper range is telling. The market seems to prefer clear signals. Without confirmation of a change in supply and demand dynamics, any upward movement beyond previous highs is likely to be temporary.
So, while headlines may be alarming, the market doesn’t respond immediately—and neither should we.
Key FX option expiries include EUR/USD at 1.1490-1.1500, affecting price movements with dollar flows.
On June 23, pay attention to several foreign exchange option expiries, especially for EUR/USD. Expiries around the levels of 1.1490 to 1.1500 may impact price changes, particularly with important hourly moving averages positioned between 1.1503 and 1.1515.
Right now, dollar fluctuations are primarily influenced by events in the Middle East. The dollar is gaining value, but this has a limited effect on overall market risk. As a result, significant price swings may not happen.
USD/JPY Levels
Keep an eye on USD/JPY as it nears 147.00, with a significant 100-day moving average sitting at 146.78. A strong move above this level could strengthen the dollar in the coming sessions. This information highlights key technical points in both EUR/USD and USD/JPY that could be affected by upcoming FX option expiries and broader market trends. The expiries clustered around 1.1490 to 1.1500 for the euro-dollar pair and several key moving averages around 1.1503 to 1.1515 might create a soft ceiling just above 1.1490, at least for now. This close proximity of expiry interest and technical indicators may lead to some supply, but we should only expect temporary resistance unless there’s a significant shift in sentiment or data. For those trading derivatives, premiums near this strike might be more volatile, especially if the spot price stays close to this area as the New York cut approaches. Traders with positions that expire soon should reconsider their delta hedging strategies if the spot moves towards the upper end of this range. There isn’t much reason to expect a strong move in one direction without additional factors, but prices in this area could become more unpredictable during times of low liquidity.Middle Eastern Influence on the Market
In the USD/JPY pair, the spot price continues to rise with 147.00 nearby, aligning with a longer-term trend at 146.78. If this area is cleared with strong closing prices, it could trigger bullish momentum. We are closely watching whether the 100-day moving average, often a crucial point for this pair, will serve as a strong attraction or a launchpad. If the price holds above this level late in the day, tactical buyers may seize the opportunity, particularly if implied volatility remains stable. Middle Eastern developments are slightly increasing dollar demand, more evident in the spot market than in options pricing or cross-asset volatility. Risk indicators, such as equity index futures and emerging market currencies, aren’t showing much movement. This suggests that the current price changes are based more on technical factors than on panic or significant repositioning. Thus, while price movements at these levels are worth monitoring, they do not yet indicate a major market shift. For those engaged in gamma or risk reversals, we are observing realized volatility over the past five sessions, which remains lower than implied volatility, indicating a subdued environment for volatility buyers unless unexpected macro events arise. Stay alert for any intraday reversals around 1.1500 in EUR/USD or rejections at 147.00 in USD/JPY. These events could trigger rapid adjustments among market makers, with short-dated options likely to respond accordingly. Create your live VT Markets account and start trading now.S&P 500 futures show bullish signs, hinting at market recovery opportunities amid U.S.-Iran tensions
S&P 500 Futures are showing strong upward momentum above the VWAP, based on today’s tradeCompass analysis. The bullish targets are set above 6,001, while bearish scenarios arise below 5,982, with the current price around 6,000.
Recent U.S. strikes on Iranian nuclear facilities briefly caused market volatility, but S&P 500 E-mini Futures rebounded by 49 points to settle above 6,000. Analysts believe the market might anticipate a measured response from Iran instead of further escalation.
For a bullish approach, traders can look to enter the market just above 6,000 or on a pullback to 5,997.25. Profits can be taken at several key points, including 6,008 and 6,100. In bearish situations, traders should prepare to act below 5,982, with target levels like 5,974 and 5,935.
Key levels such as VWAP, POC, VAH, and VAL help define the market’s structure and overall mood. They indicate whether the sentiment is bullish or bearish, which guides traders on when to take profits or limit losses. The tradeCompass strategy emphasizes structured risk management and adaptability to changing news.
The current S&P 500 Futures momentum shows a solid push upwards, particularly above the Volume-Weighted Average Price (VWAP), a crucial indicator for short-term traders. The quick recovery from initial concerns over military actions indicates a level of confidence that the worst reactions may be over.
Traders are keeping an eye on specific price points, much like road signs. If the price goes above certain levels, it’s a bullish sign; if it drops below others, it indicates potential setbacks. These levels signal the market’s risk appetite and movement.
The suggested entry and exit points encourage discipline. Positioning just above 6,000 or waiting for a drop into the mid-to-high 5,990s isn’t about simply being right; it’s about timing. The focus is on gradual gains, so traders can lock in partial profits before aiming for higher targets. This structured approach helps maintain control.
On the downside, caution is warranted below 5,982. This planned descent allows for re-entries, exits, or helps avoid emotional decision-making. Specific targets like 5,974 and 5,935 may serve as points for sellers to step in again, or where buyers will look to re-enter.
The technical levels like VWAP, POC, VAH, and VAL are important reference points where trading interest has concentrated. For example, if prices stay above a Value Area High (VAH), it’s seen as strength. Conversely, dipping toward a Value Area Low (VAL) can indicate weakness. These levels help traders understand market behavior and recent money flows.
Approaching volatility involves riding it out rather than predicting it. The outlined strategy reacts with intention, minimizing risk by entering at safe points and anticipating market moves.
In upcoming sessions, market players will likely revisit these levels, especially if geopolitical tensions arise again. These price levels aren’t guesses; they’re based on observed behavior. Trading decisions are made according to the price actions relative to these established metrics.
As we go through this week and into the next, the market pace may change, but traders with a clear plan anchored to these structural levels will adapt better. Continued price movement above the set key levels favors continuation. If there’s a shift—especially due to external news—the trading setups will adjust as needed.
US military actions drove up oil prices and the dollar, leading to weakened currencies.
Business Activity in Asia
In June, Australia and Japan saw better business activity. Australia’s flash PMIs showed growth in business, fueled by new orders, even though export orders fell. Japan’s flash composite PMI also went up, boosted by strong performance in services and manufacturing. The USD/JPY is trading close to a five-week high, and gold prices fell after an initial rise. President Trump mentioned potential regime change in Iran, raising fears of more conflict in the Middle East. This article explains a series of events triggered by recent US military actions targeting Iranian nuclear facilities. These strikes caused oil prices to spike sharply and strengthened the dollar. A large fleet of aircraft and cruise missiles was involved, leading to quick movements in major currency pairs, especially in the G10 countries. The USD improved while currencies like the AUD, NZD, and GBP weakened. Even safe-haven currencies like the JPY and CHF showed surprising weakness during the Asian session. For those closely watching geopolitical tensions and market volatility, this reaction follows a familiar pattern. Typically, crude prices rise during military conflicts, especially when they impact energy supply. After the initial spike at the Globex open, Brent crude was unable to maintain levels above short-term resistance, suggesting traders should be cautious not to overcommit to momentum trades lacking follow-through.Market Reactions and Future Trends
Equity futures briefly fell after the news but quickly bounced back, recovering nearly all losses. This behavior indicates a market willing to adjust risk gradually rather than panic. The latest PMI data from Australia and Japan show a sense of stability; both countries reported improvements in business activity. Australia experienced growth due to domestic orders, despite a drop in export demand. In Japan, the services sector remained strong, and manufacturing output improved, lifting the composite PMI. Foreign exchange reactions show a shift from regional issues to global themes, especially regarding USD/JPY, which has reached new multi-week highs. This rise is supported by yield spreads and the waning safe-haven appeal of the yen. Meanwhile, gold—a go-to during crises—rose initially but then fell, indicating traders are reevaluating risk as market focus shifts from headlines to broader economic signals. President Trump’s comments about regime change escalated already high tensions, impacting market sentiment even after some price behaviors stabilized. The future will depend on how energy flows and regional alliances react. As North American markets reopen, we will likely see more significant movements. Ignoring the broad impact of geopolitical events on trading strategies would be unwise. As we analyze options and the correlation between spot and volatility, the quick reversal in oil’s rally suggests caution for high-beta currencies. Given this pattern across commodities and FX, the market hasn’t fully committed to a trend yet, guiding how traders manage risk in the short term. While yields and rate differences are crucial for mid-term pricing, short-term moves remain sensitive to developments from Washington and Tehran. In summary, without a sustained directional move in commodities or FX, derivative trading desks should stay alert to news headlines, while keeping an eye on slower-moving macro indicators. Create your live VT Markets account and start trading now.Japan’s PMI shows signs of recovery, but businesses stay cautious due to fragile demand and uncertainty
Japan’s private sector showed more signs of recovery in June. The flash composite PMI rose to 51.4 from 50.2 in May, thanks to stronger services and a small increase in manufacturing output.
However, demand conditions still appeared weak. New business growth remained modest, impacted by lower overseas demand due to U.S. tariffs and global trade uncertainties affecting exports.
Companies are cautious about the future, with sentiment close to post-pandemic lows. On the bright side, input cost inflation fell to its lowest in 15 months, and employment grew at its fastest rate in nearly a year.
The June figures reveal some resilience. Although the change in the composite PMI from 50.2 to 51.4 may seem small, it’s significant given the last 18 months. The improvement stems from stronger services and a rebound in manufacturing output—two sectors that had been opposing each other recently.
Still, while output levels increased, overall demand hasn’t surged. New business growth has been slow, indicating that customers—both domestic and international—remain uncertain. Exports are particularly struggling. International challenges like higher import taxes and unclear global trading rules are suppressing foreign orders. This hesitation has a ripple effect on broader industrial planning.
Expectations for the future haven’t returned to pre-2020 levels either. Business optimism is low, and there’s a sense of hesitation. Companies, whether small or large, are thinking carefully before making new investments or expansions.
However, some indicators show improvement. Input cost inflation has softened, which provides relief, especially for sectors that depend on imported energy or raw materials. This allows companies to stabilize their pricing without immediately passing higher costs onto customers. Job creation also increased, marking its fastest growth in almost a year, suggesting some confidence that orders will remain steady.
What’s important is that the data shows mixed signals. There’s neither a significant advance nor a dramatic decline. The uneven improvement is what matters most.
Given the increase in output but lingering demand concerns, we may be seeing a base forming under activity. However, it’s also fair to believe that there won’t be much room for growth, especially with global trade risks and sentiment stuck in narrow ranges. This provides a framework for considering potential short-term shifts.
The growth in employment reduces fears of sudden drops, but it also means that earnings and consumption expectations could improve slightly. A decrease in cost pressures might lead to lower inflation over time, influencing interest rate expectations. This could help stabilize the yen, particularly if Tokyo’s policies diverge from those of other major economies.
In terms of positioning, it makes sense to have moderate exposure to output-sensitive sectors, while hedging against potential downturns in demand. We should be cautious and not assume that early output growth confirms a broader trend. The inconsistencies across sectors, especially in exports, indicate that everything isn’t moving together just yet.
It’s also crucial to keep in mind last year’s weaker data, which raises the bar for interpreting month-to-month changes. A modest PMI increase like the recent one might seem more significant on paper than it feels to those managing supplies.
There’s potential for short-term trades if inflation expectations align with the slow trend in input costs. If the strength in employment leads to a slight increase in domestic consumption, that could tighten yield gaps even more. Strategic calendar spreads might capitalize on mismatched expectations of central bank reactions.
However, it’s not yet the time to dive into high-risk investments with strong confidence. The softness in new orders and ongoing uncertainty around foreign demand still loom large, suggesting that strategies should be focused on flexibility rather than long-term commitment.
Silver price exceeds $36.00 due to risk aversion and increased tensions in the Middle East
Silver prices have risen to about $36.10 early Monday during Asian trading. This increase follows the U.S. attacks on Iran’s nuclear sites, which have raised tensions in the Middle East.
Iran’s promise to respond has made the markets nervous. If things escalate, demand for safe-haven assets like silver could rise. U.S. President Trump has warned that any retaliation from Iran will lead to a stronger response.
Fed’s Potential Influence
Officials from the U.S. Federal Reserve, including Governor Waller, have suggested possible interest rate cuts as early as July. This outlook has supported silver prices because lower rates can make the metal cheaper for foreign buyers. However, the renewed strength of the U.S. Dollar might limit how much silver prices can grow. Investors are looking forward to the preliminary U.S. S&P Global PMI for June. Strong data from the U.S. could strengthen the Dollar in the near future. Silver is used in many industries due to its excellent electrical conductivity. Changes in industrial demand can affect its price, as silver is widely used in electronics, solar energy, and is also tied to gold. Silver prices often follow gold’s movements, influenced by similar factors like economic stability and geopolitical issues. The recent surge in silver prices to around $36.10 reflects two key issues: geopolitical unrest and changes in monetary policy. With attacks on critical sites in Iran and warnings from Tehran, safe-haven assets are absorbing the market’s shock. Silver benefits from increased political risk, as it serves both as a store of value and an industrial metal. As seen early Monday, these trends continue, and market anxiety is growing. From Washington, the language has become more cautious. President Trump’s strong warnings about retaliation suggest that any further actions could quickly escalate the situation. As a result, market volatility has increased, with silver becoming a popular option for those seeking protection against potential losses. Traders should watch for possible price increases if tensions worsen, especially if reports become more direct or actions in the region resume.Monetary Positioning and Market Dynamics
At the same time, monetary positioning is providing additional support. Governor Waller and others at the Federal Reserve have left the possibility of rate cuts open for July. Lower interest rates increase the appeal of holding metals like silver, which do not earn interest. This environment is slightly favorable for metals due to easing inflation, encouraging more buying. Yet, it’s not all one-way movement. The Dollar has shown some strength, which can limit gains in USD-denominated commodities. If the upcoming S&P Global PMI data is better than expected, the Dollar could rally, putting further upward pressure on silver prices in the short term. This creates a mixed situation where the demand for safe-haven assets is rising, but a stronger Dollar could counteract that. From a strategic viewpoint, silver is sensitive not only to market sentiment but also to changes in manufacturing demand. It is heavily used in electronics, solar panels, and clean energy processes. Any decline in demand in these areas will have an impact on prices. We will also be monitoring gold, as their price movements are often linked and respond similarly to broader economic signals. We will keep an eye on guidance from the Fed at upcoming speaking events and monitor physical silver delivery trends. Stronger flows into ETFs or tighter spreads in dealer markets could suggest capital is shifting toward metals for the medium term. Currently, near-term options skews are low, indicating traders may not be fully prepared for sudden moves. Adjusting risk exposure while markets are sensitive to news could be wise. As events unfold in the Middle East and among central bankers, staying alert to cross-market signals is crucial. While the silver market typically reacts quickly, broader trends often take longer to adjust. Create your live VT Markets account and start trading now.Democratic Republic of Congo extends cobalt export ban, leading to sharp price increases
The Democratic Republic of Congo, the world’s top cobalt producer, has extended its temporary export ban on cobalt for another three months. This ban is now effective until September 2025, following an initial four-month pause that began in February. The extension comes after cobalt prices plummeted to a nine-year low of about $10 per pound.
As a result of this ban, cobalt prices have risen by 35%. The pause in exports is especially impacting companies like Glencore, and has led other regions, including Indonesia, to prepare for possible ongoing restrictions. These changes could alter market shares and affect global supply chains.
Market Supply Shift
The current scenario highlights a significant shift in market supply, driven mainly by policy changes in the Democratic Republic of Congo. With the cobalt export ban extended through the third quarter of next year, we are seeing changes in pricing. Initially, this was a reaction to long-term low prices, but it has evolved into a response that directly affects trading volumes and price volatility. Cobalt futures quickly reacted; the 35% price increase is not just recovery but also a re-evaluation of supply and future risks. Usually, slow physical market restrictions take time to reflect in derivatives, but that’s not happening here. Prolonged disruptions tend to alter assumptions about future pricing, and we are already seeing this recalibration, especially for the second half of 2025. These changes impact not just the current rates—there’s a growing sense of scarcity affecting shorter-term contracts. Market participants will have adjusted how they view the correlations between cobalt and related metals like nickel and lithium. Movements in those metals have been less drastic, suggesting that this reassessment is localized. However, there is potential for wider effects as substitution factors start to influence pricing models. The impact of reduced cobalt supply will also affect contract structures, particularly for instruments used for synthetic exposure by industrial hedgers.Glencore And Indonesia
Looking at Glencore, the pause in Congolese exports has significantly reduced market flow. This creates an opportunity for smaller producers to fill the gap, although they may do so slowly. Since processing is concentrated in just a few areas, especially China, any drop in raw materials leads to delays that impact settled prices. We can no longer just depend on stated production capacity—timing is now more critical than volume. In Indonesia, we’ve noticed mining companies gearing up to increase output, likely in anticipation of future supply needs. If this trend continues, and if exports are made under competitive contracts, the differences in pricing between regions could tighten paper market spreads. Currently, these movements show less correlation, but they suggest a buffer capacity that we didn’t focus on earlier in the year. The tight supply situation should raise awareness about margin requirements, especially for short positions. Strategies that relied on earlier low prices now face risks from both price changes and access costs—financing availability and delivery obligations are now more sensitive to changes in contract pricing. We are increasing our near-term volatility estimates, especially around important inventory data releases and policy updates. Seasonal factors are less impactful now; policy and logistics play a much larger role. Create your live VT Markets account and start trading now.USD/CHF trades near 0.8170 as safe-haven demand increases after earlier gains
USD/CHF has dropped, trading around 0.8170 during Asian hours on Monday. The Swiss Franc gained support as safe-haven demand rose, driven by recent U.S. actions regarding Iran’s nuclear sites.
U.S. President Trump confirmed attacks on Iran’s nuclear facilities in cooperation with Israel. As a result, tensions are likely to increase, with Iran vowing to defend itself.
Switzerland’s trade surplus fell to CHF 2.0 billion in May, down from CHF 5.4 billion in April. This is the smallest surplus since December 2023, and key economic data will be released this week.
In the U.S., Federal Reserve Governor Christopher Waller hinted at possible easing of monetary policy soon. However, Fed Chair Jerome Powell cautioned that this depends on improvements in labor and inflation data.
The Swiss Franc (CHF) is one of the most traded currencies globally. Its value is influenced by market sentiment, economic conditions, and the Swiss National Bank’s actions.
Switzerland’s stable economy and political neutrality make the CHF a favorite safe-haven asset. Its value is also impacted by the economic health of the Eurozone, closely related to the Euro.
The Swiss National Bank reviews its monetary policy quarterly, aiming for inflation of less than 2%. Changes in economic growth or inflation can affect the CHF’s value.
Given recent events, currency traders dealing with the USD/CHF pair should focus less on speculative sentiment and more on real changes in macroeconomic and geopolitical landscapes. The Franc’s early-week gain shows a direct market response to increased military tensions and defensive posturing from Iran. Rising geopolitical stress typically boosts demand for safe-haven currencies, including the CHF, especially during potential military conflicts. Switzerland’s political neutrality reinforces investor interest, leading to a swift influx into the Franc.
The recent reduction in Switzerland’s trade surplus – from CHF 5.4 billion to CHF 2 billion – suggests a quicker-than-expected decline in export contributions. For traders, this is significant beyond just a statistic; it could indicate weakened external demand or higher import costs, slightly weakening the case for long CHF positions. Before this week’s data releases, any disappointing figures may have additional negative effects. Currently, market sentiment is more influenced by external events than by domestic data.
Meanwhile, in the U.S., uncertainty remains. Waller’s suggestion of potential rate cuts has raised expectations of possible monetary easing, but there’s no clear timeline. Traders should be cautious about misinterpreting signals since Powell’s remarks tie any actions to upcoming labor and inflation data. Thus, monetary policy will depend on the outcomes, not a set schedule.
Until there are notable improvements in U.S. employment and clear signs of decreasing inflation, the dollar is unlikely to weaken significantly. Temporary dips will likely result from external shocks, like these recent military strikes, rather than from dovish central bank policies. A full pivot from the Fed is not apparent yet, and traders should avoid jumping to conclusions too soon.
The Swiss National Bank focuses on price stability with a ceiling of 2%. While they review their policies every quarter, they usually react decisively when their goals are threatened. Currently, with inflation within their target and no pressing concerns in GDP growth, there’s little need for a major change in approach. More likely, they will maintain a wait-and-see stance unless rising import costs or Eurozone instability demand intervention.
It’s also important to recognize that the CHF often moves with the EUR due to the close relationship between the two regions. Should Eurozone data decline—whether in manufacturing PMIs or consumer confidence—it could negatively impact Swiss exports and the Franc’s value. We’re monitoring that situation closely for any warning signs.
In terms of market positioning, significant military escalations should not be overlooked. The recent shift in USD/CHF shows how quickly market sentiment can change. However, if U.S. macro data remains strong, fluctuations in dollar strength could mitigate any reaction from geopolitical tensions. These two forces—regional stability and monetary clarity—will create pressures in both directions, requiring traders to be adaptable and strategic in the coming days.
