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Written by Tom Westbrook and Alan John
SINGAPORE/LONDON (Reuters) – The Swiss National Bank became the first major central bank to ease policy this cycle, boosting investor optimism that interest rate cuts are on the way in many countries. Global stock indexes hit record highs on Thursday.
Gold prices and stock benchmarks in Japan and Europe have already fallen on the S&P 500 on Thursday after the US Federal Reserve left interest rates unchanged and said it would stick to its plan to cut interest rates by 75 basis points (bp) this year. It was following the new record high. .
The Bank of England then left interest rates unchanged but said the UK economy was “on the right path” to start cutting interest rates, capping a successful week for central banks around the world.
Two government officials who had previously called for interest rate hikes have changed their stance.
The decision sent Britain’s resource-rich FTSE 100 index up further, rising 1.5%, weighing on the pound, which fell 0.4% against the dollar to $1.2738.
But the bigger drama was in Switzerland, where the Swiss National Bank became the first major central bank to ease policy, cutting its key interest rate by 25 basis points to 1.50% in an unexpected move that caused the currency to weaken.
The euro rose as much as 1.2% to 0.978 francs, its highest since July 2023, and the dollar rose by the same amount to 0.8975 francs, its highest in four months.
Switzerland’s benchmark index was last up 0.9%, outpacing Europe’s STOXX 600 index’s 0.6% rise, but European benchmarks as a whole have already reached record highs. Swiss government bond yields fell.
“We have been following Chairman Powell’s speech today and the SNB with great interest, and while there has been some heat in some of the inflation reports and service inflation, overall the central bank remains relatively comfortable,” he said. “This broadly supports the narrative that the position is in place.” Sammy Charle, chief economist at Lombard Odier.
“The most comfortable region is Switzerland because inflation is under control. Let’s keep in mind that we had to revise our inflation outlook significantly downwards,” he said, referring to the Swiss National Bank. Ta.
Switzerland’s inflation rate has remained within the Swiss central bank’s target range of 0-2% for the past nine months.
Federal Reserve Chairman Jerome Powell said Wednesday that the underlying “story” is that recent high inflation rates will gradually ease price pressures, as the central bank is on track to cut interest rates three times this year. has not changed, and asserted that steady economic growth will continue.
He spoke after the Federal Reserve kept U.S. interest rates unchanged at 5.25% to 5.5%, as expected. Current market prices reflect expectations that the Federal Reserve and European Central Bank will begin lowering interest rates at their June meeting.
U.S. S&P 500 futures rose 0.5% on Thursday, after hitting a new all-time high on Wednesday, indicating further upside potential. Earlier, Japan’s Nikkei weighted index and Taiwan weighted index each rose 2% to record levels. [.T] [.N]
Government bonds rose for the second day in a row. The yield on the US 10-year Treasury note fell 3 basis points to 4.245%. The yield on German 10-year bonds also fell by 3 basis points to 2.40%. [US/]
Thanks in part to falling yields, non-yielding gold rose to an all-time high of $2,222.39 an ounce, up 0.9% in the last session. [GOL/]
Elsewhere in the foreign exchange market, the dollar fell on expectations of a U.S. interest rate cut and then rebounded, but the decline temporarily lifted Japan’s yen from near multi-decade lows to 150.27 per dollar. It recovered to the yen.
The yen was flat on the day at $151.2, while the euro was down 0.13% at $1.0907.
Brent crude oil futures, which rose 5.6% in less than a week due to supply concerns, softened slightly to $85.80 per barrel. [O/R]
(Editing by Sam Holmes and Miral Fahmy)
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