Latest news with #AmandaCooper
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3 days ago
- Business
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Analysis-Why Switzerland's strong franc could lead it back to negative interest rates
By Amanda Cooper and Naomi Rovnick LONDON (Reuters) -Switzerland could be the first big economy to return to negative interest rates to fight a surging currency and falling prices, highlighting how quickly central bankers may be running out of conventional policy tools as a global trade war rages on. Data this week showing Swiss consumer prices fell in May prompted traders to prepare for the Swiss National Bank to cut its 0.25% benchmark rate to below zero, as it struggles to cool the red-hot franc. In 2022, Europe's central banks left behind a decade of below-zero rates that hurt banks and savers alike. Introduced to stimulate lending, negative rates turned money orthodoxy on its head by charging banks to park deposits with their central bank rather than paying them interest for doing so. Many policymakers have since concluded they didn't work as well as hoped, weighing on bank profits at a time when they needed to invest and pushing investors into riskier assets. As Switzerland tries to stimulate its economy it is under scrutiny by the U.S. administration for how it deals with its currency, traditionally seen as a safe-haven in unstable times. U.S. President Donald Trump's trade war has raised the risk of inflationary pressures and slower growth - a nightmare combination for central bankers, politicians, businesses and households. Complicating matters for non-U.S. policymakers is an across-the-board appreciation in tariff-sensitive currencies, from the euro and pound to the Korean won and Taiwan dollar, which hurts their respective exports and economies. The Swiss franc has gained nearly 11% against the dollar in 2025, marking its best performance at this point in the year since 2011. The problem the SNB and its peers face is that traditional policy tools, such as talking their currencies down or tinkering with short-term lending rates, are ineffectual in this environment. "Drivers of inflation which lie out of the control of any central bank always cause them to get into a bad equilibrium or a policy error," James Athey, fixed income manager at Marlborough, said. The SNB "are bullied by the FX market into going to negative rates," he said. The SNB declined to comment on that notion, but separately on Friday said it would intervene in currency markets where necessary to keep inflation on track after Switzerland was added to a U.S. list of countries monitored for unfair currency and trade practices. While other central banks are also dealing with the fallout of a weaker dollar, Switzerland has the lowest rates among big developed economies, followed by Japan, at 0.5%. Japan too is fighting to anchor inflation and the yen has gained 9% year-to-date. DON'T BE NEGATIVE Japan and euro zone governments plan huge spending packages that could stimulate growth and keep negative rates off the menu. The European Central Bank on Thursday cut rates to 2% and traders expect just one more quarter-point cut this year. The Bank of Japan is still in tightening mode, even as it too has been stymied by uncertainty over tariffs. "There are fairly good reasons to think that negative rates are not impossible over the next few years ... but I just don't think at the moment, unless there's a big shift in the economic narrative, that we're going to get even close to a point of negative interest rates anywhere apart from the SNB," George Moran, European economist at RBC, said. Trump has berated Federal Reserve Chair Jerome Powell for being too slow to loosen U.S. monetary policy, while other central banks cut rates. Exchange rates are another bugbear: he has repeatedly called out China for keeping the yuan artificially low to keep exports cheap. Other countries that use currency intervention as a tool, such as Japan and Switzerland, also risk drawing Trump's ire, exactly when they are racing to seal trade deals with him. The U.S. Treasury Department on Thursday in its semi-annual currency report did not label Switzerland a currency manipulator, but it did add it to its "monitoring list" that includes China, Japan and Taiwan, among others. The SNB on Friday said it did not engage in manipulation of the franc. "It's going to be difficult for them (Switzerland) to be overly aggressive on the currency, but they have been in the past," Toby Gibb, head of investment solutions at UK fund manager Artemis, said. "While the obvious thing these countries will want to do is devalue, that's going to put them in the firing line," he said. Marlborough's Athey said the rapid shifts taking place in the global economy is raising the risk of mis-steps. "All that has to increase the chances that we don't know, that we're wrong. That's all of us. Investors, central banks, everyone," he said. "We're more likely to be wrong about where we are, where we're headed and what the outcomes for economies, inflation and currencies will be." (Additional reporting by Karin Strohecker in London, John Revill in Zurich and Vidya Ranganathan in Singapore; Editing by Dhara Ranasinghe, Elisa Martinuzzi and Elaine Hardcastle) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
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Analysis-Why Switzerland's strong franc could lead it back to negative interest rates
By Amanda Cooper and Naomi Rovnick LONDON (Reuters) -Switzerland could be the first big economy to return to negative interest rates to fight a surging currency and falling prices, highlighting how quickly central bankers may be running out of conventional policy tools as a global trade war rages on. Data this week showing Swiss consumer prices fell in May prompted traders to prepare for the Swiss National Bank to cut its 0.25% benchmark rate to below zero, as it struggles to cool the red-hot franc. In 2022, Europe's central banks left behind a decade of below-zero rates that hurt banks and savers alike. Introduced to stimulate lending, negative rates turned money orthodoxy on its head by charging banks to park deposits with their central bank rather than paying them interest for doing so. Many policymakers have since concluded they didn't work as well as hoped, weighing on bank profits at a time when they needed to invest and pushing investors into riskier assets. As Switzerland tries to stimulate its economy it is under scrutiny by the U.S. administration for how it deals with its currency, traditionally seen as a safe-haven in unstable times. U.S. President Donald Trump's trade war has raised the risk of inflationary pressures and slower growth - a nightmare combination for central bankers, politicians, businesses and households. Complicating matters for non-U.S. policymakers is an across-the-board appreciation in tariff-sensitive currencies, from the euro and pound to the Korean won and Taiwan dollar, which hurts their respective exports and economies. The Swiss franc has gained nearly 11% against the dollar in 2025, marking its best performance at this point in the year since 2011. The problem the SNB and its peers face is that traditional policy tools, such as talking their currencies down or tinkering with short-term lending rates, are ineffectual in this environment. "Drivers of inflation which lie out of the control of any central bank always cause them to get into a bad equilibrium or a policy error," James Athey, fixed income manager at Marlborough, said. The SNB "are bullied by the FX market into going to negative rates," he said. The SNB declined to comment on that notion, but separately on Friday said it would intervene in currency markets where necessary to keep inflation on track after Switzerland was added to a U.S. list of countries monitored for unfair currency and trade practices. While other central banks are also dealing with the fallout of a weaker dollar, Switzerland has the lowest rates among big developed economies, followed by Japan, at 0.5%. Japan too is fighting to anchor inflation and the yen has gained 9% year-to-date.
Yahoo
15-05-2025
- Business
- Yahoo
Morning Bid: Another won bites the dust
By Amanda Cooper (Reuters) - A look at the day ahead in U.S. and global markets by EMEA markets breaking news editor Amanda Cooper. It's looking very much like another "risk-off" day for the markets today, where stocks, the dollar and commodities are down, while bond prices are ticking up and safe-haven currencies like the Japanese yen and the Swiss franc are enjoying a rally. The sugar rush earlier this week from the U.S./China trade truce seems to have given way to a sugar hangover. Traders seeking another hit will now be scouring data on U.S. consumer spending and various surveys of regional business activity, while also hoping to hear soothing words from Fed Chair Jerome Powell. The Reuters markets team is here to provide you with all the information you need to start your day. Today's Market Minute * Republicans in the U.S. Congress advanced major elements of President Donald Trump's budget package on Wednesday, as key committees approved tax cuts that would add trillions of dollars to the U.S. debt, while cutting spending on healthcare for the poor and disabled. * U.S. President Donald Trump said on Thursday that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had "sort of" agreed to the terms. * Elon Musk's political action committee failed to pay registered swing state voters as promised during last year's U.S. election in return for signing a petition or referring other voters, according to a proposed federal class action lawsuit. * Oil barely garnered a mention from U.S. President Donald Trump during his glitzy visit to Saudi Arabia this week. But the black gold may explain why the trip went so smoothly. Find out why in Reuters' columnist Ron Bousso's latest piece. * China's soybean imports recently dipped to a 12-year low, but top supplier Brazil's latest export volumes to China have hit all-time highs. So how does this all fit together? Reuters' columnist Karen Braun breaks it down. ANOTHER WON BITES THE DUST Every U.S. administration for decades has indicated it maintains a strong dollar policy. It's no secret that Trump's administration wants a weaker currency to help grease the wheels as it seeks to get the rest of the world to buy more U.S. goods and services. The flipside, of course, is that a weaker currency will drive up the cost of any imported goods and services, thereby heaping more pain on a U.S. consumer that already face a hit from tariffs - even if these levies are not currently at the eye-watering levels Trump first floated as part of his April 2 "Liberation Day" tariff bonanza. Against a basket of currencies, the dollar has fallen 7% this year, which puts it on course for its biggest annual decline since 2017, when the index fell almost 10%. However, the dollar index might not be the best representation of what is happening with the U.S. currency right now. The index was established in 1973 by the Federal Reserve as a basket of the currencies of six large U.S. trading partners and currently includes the euro, the Japanese yen, the pound, the Canadian dollar, the Swiss franc and the Swedish crown. The six biggest U.S. trading partners now are Canada, Mexico, China, Germany, Japan and South Korea. A simple average of the year-to-date decline of the dollar against those currencies is roughly 5.6%, although this does not take into account any kind of weighting based on trade. Trump would like to see a number of currencies appreciate against the dollar and, Asian exporting nations could be among the candidates. Currency markets got something of a bombshell on Wednesday in the form of reports that South Korean and U.S. officials sat down last week to talk trade and discuss the dollar/won exchange rate. Cue a rip higher in the Korean won, which has already strengthened by more than 5% since April 2, as it heads for a third straight daily gain. As ever with markets, these things rarely happen in isolation. The move in the won has shades of the unprecedented rally in the Taiwan dollar earlier this month, which surged 6% in two days, clocking its largest single-day percentage gain since the 1980s. The parallels between the two has given rise to speculation that the Trump administration might shift its gaze to the FX market and put pressure on its trading partners to allow their currencies to appreciate in value, thereby removing some of what the president perceives as an unfair advantage. Big exporters tend to like big currency weakness. Haggling over import duties on various goods and services can bring mutual benefits to both parties, even with the compromises that inevitably come along with that process. FX, however, is a lot more binary. If one side of a currency pair depreciates, the other must appreciate and that might be a tougher pill to swallow. Chart of the day Walmart is going to be in sharp focus today. The world's largest retailer delivers first-quarter earnings, and investors will be anxious to see how the company is dealing with tariffs, trade ructions and consumer boycotts. The Arkansas giant is one of just a handful of large companies that has not either pulled or slashed its forecasts as it seeks to navigate Trump's tariffs. China is Walmart's largest supplier, and the company has pledged to keep prices low to beat its rivals. Walmart has run into trouble with some shoppers after the company, like many other U.S. firms, said it would roll back its diversity, equity and inclusion practices in line with Trump's executive order. Footfall at its stores, and at rivals Target and Costco has declined. Today's events to watch * Federal Reserve Chair Jerome Powell speaks at a conference in Washington. * New York Fed May manufacturing index * Philadelphia Fed May business index * April retail sales, producer price index data * Walmart Q1 earnings (Writing by Amanda Cooper; Editing by Anna Szymanski) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-05-2025
- Business
- Yahoo
Morning Bid: Another won bites the dust
By Amanda Cooper (Reuters) - A look at the day ahead in U.S. and global markets by EMEA markets breaking news editor Amanda Cooper. It's looking very much like another "risk-off" day for the markets today, where stocks, the dollar and commodities are down, while bond prices are ticking up and safe-haven currencies like the Japanese yen and the Swiss franc are enjoying a rally. The sugar rush earlier this week from the U.S./China trade truce seems to have given way to a sugar hangover. Traders seeking another hit will now be scouring data on U.S. consumer spending and various surveys of regional business activity, while also hoping to hear soothing words from Fed Chair Jerome Powell. The Reuters markets team is here to provide you with all the information you need to start your day. Today's Market Minute * Republicans in the U.S. Congress advanced major elements of President Donald Trump's budget package on Wednesday, as key committees approved tax cuts that would add trillions of dollars to the U.S. debt, while cutting spending on healthcare for the poor and disabled. * U.S. President Donald Trump said on Thursday that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had "sort of" agreed to the terms. * Elon Musk's political action committee failed to pay registered swing state voters as promised during last year's U.S. election in return for signing a petition or referring other voters, according to a proposed federal class action lawsuit. * Oil barely garnered a mention from U.S. President Donald Trump during his glitzy visit to Saudi Arabia this week. But the black gold may explain why the trip went so smoothly. Find out why in Reuters' columnist Ron Bousso's latest piece. * China's soybean imports recently dipped to a 12-year low, but top supplier Brazil's latest export volumes to China have hit all-time highs. So how does this all fit together? Reuters' columnist Karen Braun breaks it down. ANOTHER WON BITES THE DUST Every U.S. administration for decades has indicated it maintains a strong dollar policy. It's no secret that Trump's administration wants a weaker currency to help grease the wheels as it seeks to get the rest of the world to buy more U.S. goods and services. The flipside, of course, is that a weaker currency will drive up the cost of any imported goods and services, thereby heaping more pain on a U.S. consumer that already face a hit from tariffs - even if these levies are not currently at the eye-watering levels Trump first floated as part of his April 2 "Liberation Day" tariff bonanza. Against a basket of currencies, the dollar has fallen 7% this year, which puts it on course for its biggest annual decline since 2017, when the index fell almost 10%. However, the dollar index might not be the best representation of what is happening with the U.S. currency right now. The index was established in 1973 by the Federal Reserve as a basket of the currencies of six large U.S. trading partners and currently includes the euro, the Japanese yen, the pound, the Canadian dollar, the Swiss franc and the Swedish crown. The six biggest U.S. trading partners now are Canada, Mexico, China, Germany, Japan and South Korea. A simple average of the year-to-date decline of the dollar against those currencies is roughly 5.6%, although this does not take into account any kind of weighting based on trade. Trump would like to see a number of currencies appreciate against the dollar and, Asian exporting nations could be among the candidates. Currency markets got something of a bombshell on Wednesday in the form of reports that South Korean and U.S. officials sat down last week to talk trade and discuss the dollar/won exchange rate. Cue a rip higher in the Korean won, which has already strengthened by more than 5% since April 2, as it heads for a third straight daily gain. As ever with markets, these things rarely happen in isolation. The move in the won has shades of the unprecedented rally in the Taiwan dollar earlier this month, which surged 6% in two days, clocking its largest single-day percentage gain since the 1980s. The parallels between the two has given rise to speculation that the Trump administration might shift its gaze to the FX market and put pressure on its trading partners to allow their currencies to appreciate in value, thereby removing some of what the president perceives as an unfair advantage. Big exporters tend to like big currency weakness. Haggling over import duties on various goods and services can bring mutual benefits to both parties, even with the compromises that inevitably come along with that process. FX, however, is a lot more binary. If one side of a currency pair depreciates, the other must appreciate and that might be a tougher pill to swallow. Chart of the day Walmart is going to be in sharp focus today. The world's largest retailer delivers first-quarter earnings, and investors will be anxious to see how the company is dealing with tariffs, trade ructions and consumer boycotts. The Arkansas giant is one of just a handful of large companies that has not either pulled or slashed its forecasts as it seeks to navigate Trump's tariffs. China is Walmart's largest supplier, and the company has pledged to keep prices low to beat its rivals. Walmart has run into trouble with some shoppers after the company, like many other U.S. firms, said it would roll back its diversity, equity and inclusion practices in line with Trump's executive order. Footfall at its stores, and at rivals Target and Costco has declined. Today's events to watch * Federal Reserve Chair Jerome Powell speaks at a conference in Washington. * New York Fed May manufacturing index * Philadelphia Fed May business index * April retail sales, producer price index data * Walmart Q1 earnings (Writing by Amanda Cooper; Editing by Anna Szymanski) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
14-05-2025
- Business
- Yahoo
Morning Bid:'Magnificent 7' ride back into town
By Amanda Cooper LONDON (Reuters) - What matters in U.S. and global markets today by Amanda Cooper. The stock market is a little on the weaker side today, with U.S. futures mostly steady, as investors take a breather from this week's blistering rally. Global trade tensions might finally be easing, money is flowing back into the glittering AI sector and the prospect of potentially bullish Federal Reserve rate cuts is back on the table. Mike is out today, but check out his latest column to find out why U.S. budget anxiety could quickly replace the trade war tensions. Today's Market Minute * President Donald Trump kicked off his trip to the Gulf on Tuesday with a surprise announcement that the United States will lift long-standing sanctions on Syria, and a $600 billion commitment from Saudi Arabia to invest in the U.S. * Tesla plans to start shipping components from China to the U.S. for the production of Cybercab and Semi trucks from the end of this month, after the U.S. and China reached a truce over tariffs. * How will the trade war de-escalation impact China's mammoth manufacturing sector and the country's energy needs? Read Reuters' columnist Gavin Maguire's latest piece to learn which key metrics you should be tracking. * The fog of uncertainty created by Trump's trade war may be lifting, but it's leaving investors with a lingering question: what was the point of all that chaos around what the president termed "Liberation Day"? Check out Jamie McGeever's analysis in his latest column. * The comprehensive trade deal announced by the U.S. and UK governments last week was a damp squib, but that shouldn't worry Downing Street. The bigger prize is closer collaboration with the European Union, and that could accelerate after the UK-EU summit next week. Find out more in the column from Panmure Capital's Joachim Klement. The Magnificent 7 Ride Back into Town This week's stock market rally could well go down in Wall Street history as one of the most epic on record. The S&P 500 is up by more than 20% in the 36 days since it hit a 15-month low on April 7. The index took just 16 days to hit the 20%-recovery-from-the-lows mark in 2020 and 18 days in 2009. The difference this time around is there is no tidal wave of monetary or fiscal stimulus helping to grease the wheels of the rally. The bulls aren't just back, they're in the driving seat and the Magnificent 7 - Apple, Amazon, Microsoft, Nvidia, Meta and Tesla - are the engine. Investors have an affinity for shiny things. This week's cocktail of market-friendly catalysts, including the 90-day halt to the U.S./China trade war, a benign reading of inflation and a raft of headline-grabbing investment deals from the Middle East, where Trump happens to be visiting, have set the stage for Mag 7 mania once again. Nvidia has announced it will sell hundreds of thousands of its artificial intelligence chips in Saudi Arabia. Chip designer Advanced Micro Devices has unveiled a $10 billion collaboration with Humain, the Saudi sovereign wealth fund's newly minted AI startup, while the Saudi government itself made a commitment to Trump to invest $600 billion in U.S. companies. If the Mag 7 were a major drag on the broader S&P on the way down earlier this year, they're proving to be a major boon on the way back up. Most world indices have recovered the bulk of the losses triggered by the April 2 "Liberation Day" sell-off. Since then, the Roundhill Magnificent 7 exchange-traded fund has gained 11%, far outpacing the 4.5% rise in the S&P 500 since then. By contrast, the equal-weight S&P, which strips out the oversized influence of the megacaps, is barely up 1%. Tesla has rejoined the $1-trillion club this week, having dropped out in late February, while shares in Nvidia, whose name has become synonymous with the AI boom, have gained nearly 18%. Chart of the day Zooming out, so far this year the Mag 7 are lagging the rest of the market. But at this rate, they're not only catching up, they're powering the May rally. Today's events to watch * Trump tours the Middle East; Gulf Cooperation Council takes place in Riyadh, Saudi Arabia * Federal Reserve Board Governor Christopher Waller addresses an event in Rabat, Morocco * Federal Reserve Vice Chair Philip Jefferson speaks on the economic outlook * Federal Reserve Bank of San Francisco President Mary Daly participates in fireside chat before the California Bankers Association * Cisco Systems fiscal Q3 2025 earnings after the bell Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (Writing by Amanda Cooper, Editing by Anna Szymanski) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
