This week, which runs from Monday June 9 to Friday June 13, sees two fundamental factors which will have a strong impact on the stock market: the continuation of the trade diplomacy phase which is currently acting as a fundamental red thread (particularly between China and the United States) and, above all, the US inflation update according to the PCI price index on Wednesday June 11.
The key issue is to determine whether tariffs in the so-called reciprocal tariffs trade war have begun to trigger a rebound in inflation. This is what the US Federal Reserve (FED) is watching to determine whether or not it should resume cutting the federal funds rate, which has been on hold since last December.
1) Federal funds rate cuts have been on hold since the end of 2024
Unlike the European Central Bank and other major Western central banks, the FED has paused its key interest rate cut since the beginning of the year. The ECB's key interest rate, meanwhile, has been cut several times and now stands at 2.15%, i.e. a key interest rate considered neutral for the economy (i.e. neither an accommodating nor a restrictive monetary policy).
This divergence in monetary policy between the FED and the ECB is perceived as a risk by the market, while the trade war could end up having a negative impact on US economic growth.
2) The market does not expect the FED to resume cutting rates before September.
But Jerome Powell's Federal Reserve (FED) is taking a hard line, believing that the Trump Administration's trade war could undermine its efforts to fight inflation. Although the FED's inflation target of 2% is not far off, according to the latest ECP and CPI updates, the FED wants confirmation that companies have not passed on sharp price rises to compensate for the tariffs. This is why the inflation figures published this May have a decisive dimension at a fundamental level. The Fed will be able to resume cutting the federal funds rate if, and only if, disinflation is not threatened by the trade war.
3) This is why the ICP US inflation update on Wednesday June 11 is the fundamental highlight of the week.
This Wednesday, June 11, we'll be keeping a very close eye on the publication of US inflation according to the ICP. The monthly reading will be closely watched, as will the year-on-year nominal and underlying inflation rates.
The consensus is relatively pessimistic, with inflation expected to rebound at both monthly and annual rates. Real-time inflation, as measured by TRUFLATION, is still under control, so the pessimistic consensus may be overturned.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
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Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
The key issue is to determine whether tariffs in the so-called reciprocal tariffs trade war have begun to trigger a rebound in inflation. This is what the US Federal Reserve (FED) is watching to determine whether or not it should resume cutting the federal funds rate, which has been on hold since last December.
1) Federal funds rate cuts have been on hold since the end of 2024
Unlike the European Central Bank and other major Western central banks, the FED has paused its key interest rate cut since the beginning of the year. The ECB's key interest rate, meanwhile, has been cut several times and now stands at 2.15%, i.e. a key interest rate considered neutral for the economy (i.e. neither an accommodating nor a restrictive monetary policy).
This divergence in monetary policy between the FED and the ECB is perceived as a risk by the market, while the trade war could end up having a negative impact on US economic growth.
2) The market does not expect the FED to resume cutting rates before September.
But Jerome Powell's Federal Reserve (FED) is taking a hard line, believing that the Trump Administration's trade war could undermine its efforts to fight inflation. Although the FED's inflation target of 2% is not far off, according to the latest ECP and CPI updates, the FED wants confirmation that companies have not passed on sharp price rises to compensate for the tariffs. This is why the inflation figures published this May have a decisive dimension at a fundamental level. The Fed will be able to resume cutting the federal funds rate if, and only if, disinflation is not threatened by the trade war.
3) This is why the ICP US inflation update on Wednesday June 11 is the fundamental highlight of the week.
This Wednesday, June 11, we'll be keeping a very close eye on the publication of US inflation according to the ICP. The monthly reading will be closely watched, as will the year-on-year nominal and underlying inflation rates.
The consensus is relatively pessimistic, with inflation expected to rebound at both monthly and annual rates. Real-time inflation, as measured by TRUFLATION, is still under control, so the pessimistic consensus may be overturned.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.