Happy 4th of July to all of our readers who are celebrating! 🇺🇸🍻

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Switzerland to hike rates despite low inflation 🧐

Annual inflation in Switzerland fell to its lowest level in over a year!

Now at 1.7%.

It’s now below their 2% target. The rest of the world should be taking notes. 🤦🏻

But most experts think that the Swiss National Bank will continue to raise interest rates come September.

Why would they raise interest rates if inflation is low?

I know this may seem counter-intuitive. But there’s possibly a method to their madness. 👀

It starts with being proactive. If they stop raising rates now and let their guard down, prices could shoot back up quickly. 🚀

And if prices stay low, outside countries will want to do their investing in Switzerland. This is great for the economy.

Finally, raising the interest rate means that people earn more on the money they’re saving. So in a way, they’re really helping some of you out. 🤷‍♀️

Is this a recipe for US economic disaster? 🤯

And another contraction is show in the manufacturing sector of the USA with a score of 46. That’s the 8th month in a row we’ve seen a decline. 😬

What does this mean for the US economy?

Well, it could look like a few things. Less production means:

1. Less jobs in the manufacturing sector. Businesses might not be able to afford to hire new employees or keep existing ones. 👷🏽‍♂️

2. An overall decrease in GDP growth. 📉

3. Less money for businesses. Companies that rely on production or have invested heavily into making their production more efficient will lose money as manufacturing takes a hit. 💰

This will have far-reaching impacts felt throughout the country. Businesses will likely have to reduce their budgets and staff and GDP will probably take a hit.

Expect rising costs for goods and services, as they are produced with fewer resources.

And if prices are going up, the Fed is even more likely to hike the interest rate in July. 😕

Trade Of The Day 📈

USDCHF

Wednesday News

High-impact news doesn’t start until the afternoon on this side of the world. Might be a good day to sleep in. 😴

Here’s what you’re in for:
(All times in EST)

• 14:00 — What’s really going on behind the Fed rate pause?🧐

  • Event: USA: FOMC Minutes

  • Major pairs to watch: EURUSD

• 21:30 — Why Australia’s $11 billion surplus doesn’t cut it 😬

  • Event: Australia Trade Balance (MoM) May

  • Major pairs to watch: AUDUSD

What’s really going on behind the Fed rate pause?🧐

Remember a few weeks ago when the US Fed surprised us by pausing the interest rate hikes? 👀

Tomorrow, we get to see why.

The minutes from the FOMC meeting will show us how many members voted for and against the pause, and what drove their choices.

Was it a unanimous vote like back in May when all members voted for a rate increase? 🤟🏼

Or did a scuffle breakout amongst the finance big wigs? 🤜🏼 🤛🏾

A heated debate would make the report a lot less boring to read. 🙏🏼

Powell made a statement after the pause and told the US to expect at least two more hikes before the end of the year. This report will give us an idea of what to expect for the July rate decision.

I’ll take the liberty of reading the awfully long report and break it down for you later this week. 😏

Why Australia’s $11 billion surplus doesn’t cut it 😬

Australia's trade balance tells us how well the country is doing when competing in global markets.

It measures the difference between what Australia buys from other countries and what it sells to them. 🤝

When exports are greater than imports, the trade balance is positive. More selling, less buying.

This typically strengthens the Australian dollar.

While a negative balance indicates that imports exceed exports.

The last report we saw showed a positive balance of $11.158 billion but AUDUSD went down slightly.

Why is that?🧐

Although there was a surplus, the balance was down from March’s balance of $15.269 billion. This means that the demand for Australian goods may not be as steady as we thought.

Another surplus of $10.5 billion is expected for May but again, down from April’s numbers.

Expect AUDUSD ↓

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