A new trade announcement from the Trump administration has comprehensively overshadowed the Federal Reserve’s first rate cut since the financial crisis. What impact will the most recent round of tariffs have on the economy and on markets?
Switzerland is well known around the world for its high prices, with a Big Mac or a Starbucks latte costing over USD 6 each. The Swiss National Bank (SNB) itself describes the Swiss franc as “highly valued”, but it is less clear to us that the currency is significantly overvalued.
Since the end of March this year, market sentiment towards the Chinese currency has shifted significantly, coinciding with the steady divergence in cyclical positions and the escalating trade dispute between US and China. The renminbi’s underperformance against its major trade partners has been seen by investors as a natural adjustment mechanism, reflecting the People’s Bank of China’s (PBOC’s) more accommodative stance in response to economic stresses. However, the PBOC’s policy reaction function when faced with a USD/CNY parity breaching above 7.0 remains subject to uncertainty.