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I can’t believe it’s been 10 years since the January 15, 2015 break of the EUR/CHF floor and all the drama around that. But in any case, USD/CHF is at its lowest since that fateful day. Excluding that brief period, its’ trading at the lowest since 2011.

The is a rush into safe haven assets today with the Swiss franc leading the FX market. This looks like a recession trade and a bet on rate cuts and economic pain in light of the US tariff war.

Technically, I imagine the break of the 2023 and 2024 lows is adding momentum to the selling as this pair is down 303 pips today or a whopping 3.5%. That’s a massive move, though it’s been orderly on the intraday chart.

The broader implication might be that if the US wants to weaponize the US dollar and destroy international norms, then there are better places to park money. This might create a deflationary problem for Switzerland though and rates are already at 0.25 and likely to be cut to zero.

Maybe we haven’t left the era of negative rates after all?

This article was written by Adam Button at www.forexlive.com.

There is some positive news coming out of Europe today with the EU’s Sefcovic revealing that he spoke with Commerce Sec Lutnick and that counter-tariffs will be suspended as ‘meaningful negotiations’ will begin.

It will be a busy 90 days but a key question is whether the US will negotiate to allow tariff rates to fall below 10%.

The euro is up 2.2% today in the largest one-day gain since 2022 as money floods out of the US. It’s approaching the highs from late 2024.

I don’t think this news is driving the euro rally, it’s more about broad and heavy US dollar selling. The Swiss franc is putting a particularly big beating on the US dollar.

This article was written by Adam Button at www.forexlive.com.

After the big short-squeeze and relief rally yesterday, the bears are using it as an opportunity to exit positions. It’s a disappointing result and comes despite a lower CPI report.

The S&P 500 is now down 3.4% and the Nasdaq Comp down 4.2%.

I’d note that the SPX above is testing the 38.2% retracement from Tuesday’s low.

This article was written by Adam Button at www.forexlive.com.

A US budget that includes an extension of Trump’s tax cuts is moving forward by the slimmest of margins in a 216-214 vote. There is still a long road here with Trump hoping to sign the bill by late May and all the big votes yet to come.

But this vote paves the way for lawmakers to start writing the actual bill, which will have to combine Senate priorities with $1.5 trillion in spending cuts promised today.

The shift in leadership lately has been towards higher spending and deficits, with leadership and the White House appearing to tilt in that direction. I don’t think that’s going to help the long end, which is now near the highs of the day. US 30-year yields are up 2 bps to 4.81% after falling as low as 4.68% earlier.

This article was written by Adam Button at www.forexlive.com.

The US dollar is broadly and aggressively weaker today. That’s pushed USD/CAD through the 1.40 level for the first time since late November.

More broadly, the Canadian dollar is underperforming significantly as it’s risen by about 0.5% compared to 1.4% for the Australian dollar and 2% for the euro.

The market is likely pricing in lower US growth and more-aggressive Fed cuts.

This article was written by Adam Button at www.forexlive.com.

We are back to the dynamic of selling the US dollar alongside risk assets. It’s an unusual one over the past 20 years but it reflects a concern that the US will struggle compared to trading partners.

Some of it also reflects a softer US CPI report today and the potential for rate cuts, despite the tariff war. US 2-year yields are down 14 bps today to 3.80% and that compares to the Fed funds rate at 4.25-4.50%.

One spot I’m watching at the moment is USD/CAD, which is flirting with 1.40. It would be the first trip below that level since November.

This article was written by Adam Button at www.forexlive.com.

I think I saw this earlier as people were reading through the Federal Register and the latest executive order. The White House touted the rate as 125% but forgot the fentanyl rate of 20% so the total rate is now an eye-watering 145%.

The whole thing is essentially an embargo but there is room for negotiation before those actually hit as those don’t include shipments that are on water.

This article was written by Adam Button at www.forexlive.com.

The US dollar is falling today and one of the reasons is that March CPI was lower than expected. That should give the Fed and opportunity to cut rates, particularly with oil prices down another 4% today in a give-back of yesterday’s jump.

CIBC breaks down today’s CPI and notes that it’s the second consecutive downside surprise. They note that core non-housing services inflation dropped sharply to
2.9% from 3.8% and is at the lowest since 2021.

“Although that’s good news for the Fed, clearly the
subsequently announced increases in tariffs on China will work to boost inflation and uncertainty remains following the
90-day pause in tariffs for other countries that was announced, which still leaves the 10% baseline rate intact for that
period,” CIBC writes.

That’s the rub and so far indications from Fed officials are that they’re not entirely willing to look through tariff impacts.

A big driver of lower CPI was lower gasoline but they also noted a 0.8% decline in car insurance rates, which have been a persistent source of inflation. On the other side, food inflation was 3.0% in March from 2.6% previously.

Running counter to the coming tariff impacts is the long-seen decline in rents and mortgage costs that working its way into the numbers. This month though the drop in shelter was solely due to a 4.3% m/m drop in hotel prices, which is a worrying sign for travel demand.

CIBC writes:

This report extends the good news received on inflation in the prior month, but clearly the
ramping up of tariffs since then will start to come through in the data ahead, as firms will be passing on higher costs to
consumers, in line with anecdotal evidence and what was seen in the 2018/19 trade war with China. Although tariffs on
countries of above 10% have been paused for 90 days (ex. China and some other exceptions), the lingering uncertainty
will continue to weigh on sentiment and investment decisions in the US, leaving the Fed with the challenge of balancing
upside inflation risks with a deteriorating labor market. We expect the Fed will remain on hold in the first of this year and
remain very data-dependent throughout the year.

Current market pricing is for 102 bps in easing in the year ahead, with a cut fully priced in at the June 18 meeting.

This article was written by Adam Button at www.forexlive.com.

At this point, I don’t think anyone should take anything from the Trump administration at face value but what Kevin Hassett said today is a problem for the US and the global economy.

Hassett was on CNBC earlier today and said that the expectation is for the 10% universal baseline tariff to remain in place over the long term.

“It would take some kind of extraordinary deal to go below there,” he said.

That’s the kind of thing that begs for retaliation and ensures dislocations in international trade. Now this is obviously better than some of the ‘reciprocal but not reciprocal’ levels but it’s also a miscalculation to think that other countries will roll over and accept it, particularly not in the long term.

The US may think that by threatening higher tariffs and then backing down (escalate to de-escalate) that it will get away with these rates but I don’t think that’s the case. Again, I’m not putting a huge weight on what Hassett is saying here but with just a 90-day window, it won’t be too long before we find out.

This article was written by Adam Button at www.forexlive.com.

This is all childish but I imagine that the bridge eventually gets crossed because both men want to talk and want to lower the risks.

Lingling Wei from the WSJ reports

Early this week, Trump indicated he was waiting for Xi to give him a call. Xi is unlikely to do so but if Trump takes the initiative and makes the call, Xi likely would take it. GAME OF CHICKEN.

I don’t know if this is some kind of message sending through the media or speculation but Lingling Wei is generally plugged in.

This article was written by Adam Button at www.forexlive.com.

Earlier this week, Miran made waves with a speech where outlined a series of tributes that foreign countries could make to Washington for the privilege of using the US dollar.

• The cost of tariffs are borne by the countries we’re are tariffing
• American consumers can shift demand across borders
• We have to reduce regulation so factories can be built faster
• The President is famous for his negotiating skills

This was a bland appearance but indicated that Trump is planning to negotiate with China — something he has already indicated.

This article was written by Adam Button at www.forexlive.com.

A vote yesterday on moving forward with the budget resolution was pulled but speaker Johnson now says the votes are there:

“I’m happy to tell you that this morning, I believe we have the votes to finally adopt the budget resolution, so we can move forward on President Trump’s very important agenda for the American people.”

The hang-up was an insistence from fiscal hawks in the Republican party that they find $1.5 trillion in budget savings.

This article was written by Adam Button at www.forexlive.com.