Markets still digest the Warsh's way of thinking and Trump's deal

EU mid-market update: No surprises in central bank rate decisions in session; focus on upcoming BOE MPC meeting; Markets still digest the Warsh's way of thinking and Trump's deal.

Notes/observations

- No surprises in various central bank rate decisions in session so far ahead of BOE at 7:00ET (11:00 GMT); Switzerland’s SNB kept its policy rate at 0.00% for the fourth straight pause, slightly lifting 2026-2028 CPI forecasts to 0.6% while maintaining modest 1.0%/1.5% GDP growth outlooks and reiterating FX intervention readiness to support the economy. Norway paused at 4.25% (first in its tightening cycle) but raised its rate path and signaled further hikes ahead as it cut 2026 mainland GDP growth to 0.9%, reflecting tighter policy needs to anchor inflation. In Asia, the Philippines hiked 25bps to 4.75% (second move) amid sharply higher inflation forecasts; Indonesia delivered its third 25bps increase to 5.75%, prioritizing rupiah stabilization and FX interventions; while Taiwan held at 2.00% (eighth pause) despite two dissents for a hike.

- Fed futures now pricing up to 40% chance of July rate hike v under 10% before yesterday’s meeting after new Fed Chair Warsh removed prior easing bias in favor of neutral/two-sided language amid sticky inflation above target (with core pressures lingering post-Iran war shocks and strong retail sales/labor data). He notably declined to submit his own projections in the Summary of Economic Projections (SEP), citing limited value in individual rate dots for the current conjuncture. Warsh also launched five reform task forces on communications, balance-sheet management, data sources, productivity/jobs, and the inflation framework itself, signaling a deliberate shift toward less forward guidance, more humility in models, and long-term institutional credibility in a high-uncertainty environment.

- The Trump’s Iran framework is fundamentally a geopolitical ceasefire deal that buys time for nuclear talks, whereas the JCPOA was a detailed nuclear-rollback agreement that delivered sequenced economic relief. This deal has reportedly drawn sharp Israeli backlash - according to Axios, Netanyahu fumes privately, viewing it as a strategic disaster that prematurely ends the war without disarming Hezbollah or binding Israel on Lebanon withdrawal, while even some GOP allies express unease, raising risks of fragile enforcement in a nuclear-shadowed “Versailles moment.” A formal high-level meeting still expected to take place Friday, June 19 in Switzerland, featuring a U.S. delegation led by Vice President Vance and an Iranian team headed by Parliament Speaker and Chief Negotiator Mohammad Bagher Ghalibaf, aimed at pivoting directly into the 60-day nuclear negotiations.

- Despite all the criticism, 2015 Obama's JCPOA still imposed concrete, verifiable limits (3.67% enrichment cap, ~300 kg stockpile, centrifuge cuts, Fordow restrictions) with sanctions relief after IAEA verification; the current Trump's MOU defers those hard issues - especially down-blending Iran’s near-weapons-grade 60% stockpile - while offering early sanctions waivers, frozen asset access, and a confirmed $300 billion reconstruction package, even as Iran signals it will charge for Strait of Hormuz transit services rather than fully restore pre-war conditions. Overall, Trump converted battlefield leverage into a pragmatic exit ramp with Hormuz security and economic incentives absent from the original deal, but success depends on whether Friday’s launch and the follow-on phase produce a tighter JCPOA-2 with robust physical rollback—potentially stronger if rigorously enforced, or a riskier pause that echoes Versailles-style deferred tensions in a nuclear age.

- New open-source GLM-5.2 model from China's Zhipu AI seems to be accelerating the collapse in token prices. Some testers describe it as “one release away from seriously challenging GPT-5.5 and Opus 4.8,” with many noting it already beats Claude Opus 4.6 (Feb 2026) on practical agentic, coding, and design tasks while delivering a reliable 1M-token context through its efficient IndexShare architecture. The gap feels compressed to just 3-4 months, shifting perceptions from “open models lag by 6-8 months” to “close enough that price becomes the decisive factor.” As a result, the LLM Token Expenditure Index has erased nearly the entire post-agentic bounce, with premium closed-model tokens increasingly relegated to luxury use cases (high-stakes reviews, security, architecture) while cheaper open alternatives capture the bulk of volume — a structural shift that is now visibly pressuring token economics.

- Apple CEO Tim Cook signaled that price hikes for iPhones, iPads, and Macs are now “unavoidable” due to an unprecedented surge in memory chip and NAND storage costs — a “100-year flood” event he says exceeds anything seen in his career. After years of absorbing supply-chain pressures through efficiency gains and cash reserves (which Apple is now prepared to deploy aggressively to secure supply), Cook told the WSJ that the six-month commodity swing has rendered the prior no-increase stance unsustainable, though he withheld specifics on timing or magnitude to preserve negotiating leverage with suppliers.

- Elsewhere, President Trump announced that Apple has agreed to partner with Intel to design and build key chips in the United States, marking a major onshoring win for American semiconductors. This aligns with ongoing Intel-Apple discussions (including potential 14A/18A process use for future low-end A-series and M-series processors), accelerating the reversal of decades of offshore manufacturing while leveraging Trump’s tariff and industrial policy leverage to restore “Intel Inside” dominance domestically.

- Ukrainian drone strikes hit Gazprom Neft’s Kapotnya refinery — Moscow’s largest at ~240 kbpd and supplier of roughly 40% of the capital region’s fuel — triggering traffic halts on the MKAD ring road and underscoring the deepening impact of precision attacks on Russian refining. This latest blow exacerbates domestic gasoline shortages, forcing Russia — traditionally a major net exporter of refined products — to reportedly begin rare seaborne gasoline imports in June for the first time in years (beyond minor pipeline/rail volumes from Belarus or Kazakhstan), highlighting strained logistics, cumulative refinery damage, and the need to prioritize Moscow’s supply.

Asia

- New Zealand Q1 GDP Q/Q: 0.8% v 0.8%e; Y/Y: 1.5% v 1.0%e.

Global conflict/tensions

- Pres Trump and Iran Pres Pezeshkian signed interim MOU on Wednesday. Extended their ceasefire and reopening the Strait of Hormuz. Delegations set to meet in Switzerland on Friday for nuclear talks.

- Trump defended his agreement to end the Iran conflict, saying he sought to avoid an economic crisis and protect market gains.

- Iran Foreign Ministry stated that its nuclear materials would not be sent outside the country, preferred option was to dilute enriched uranium.

- Iran Chief Negotiator Qalibaf stated that Hormuz would not return to pre-war conditions; Intend to charge for transit services through the Strait; $300Binvestment allocation confirmed under the peace MOU; some funds to be used for reconstruction.

Americas

- FOMC left the Target Range unchanged between 3.50-3.75% range (as expected) with the vote to keep policy steady was unanimous. Statement noted that Economic activity is expanding at a solid pace despite elevated uncertainty. Inflation remains elevated relative to the Committee's 2% target. Policymakers adopted a more hawkish outlook, with nearly half projecting at least one rate hike by year-end.

- Fed Chair Warsh post rate decision press conference noted that nflation is well ahead of the Fed's 2% goal; Forward guidance is not well-suited to current policy stance; Confirms that he did not offer projections.

- Brazil Central Bank (BCB) cut its Selic Target Rate by 25bps to 14.25% (as expected). Decision to cut was unanimous. Statement warned that elevated global uncertainty and Middle East conflicts continued to complicate inflation forecast.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.50% at 636.12, FTSE -1.00% at 10,403.45, DAX -0.14% at 24,896.61, CAC-40 -0.04% at 8,428.70, IBEX-35 -0.37% at 19,342.71, FTSE MIB -0.28% at 52,449.50, SMI -0.23% at 13,783.90, S&P 500 Futures +0.77%].

Market focal points/key themes: European indices open mixed with an upward bias, but quickly turned negative; more hawkish Fed seen outweighing optimism after US-Iran deal; among outperforming sectors are industrials and technology; among sectors leading the way lower are materials and real estate; crude prices retreat, supporting industrial sector and travel subsector, but weighing on oil & gas subsector; focus on BOE rate decision later in the day.

Equities

- Consumer discretionary: Edenred [EDEN.FR] +16.5% (confirms it has been approached by some funds), FirstGroup [FGP.UK] +7.5% (earnings).

- Consumer staples: Tesco [TSCO.UK] -2.5% (trading update).

- Energy: Shell [SHEL.UK] -1.5% (Trump confirms MOU with Iran signed).

- Industrials: Evonik Industries [EVK.DE] -2.5% (to cut jobs).

- Technology: BE Semiconductor [BESI.NL] +0.5% (raises long-term targets).

Speakers

- SNB Policy Statement Policy Statement reiterated stance that it had increased its willingness to intervene in FX markets. Medium-term inflationary pressure virtually unchanged.

- SNB updated its Staff Projections which maintained the 2026 GDP growth forecast at 1.0% and maintained 2027 GDP growth at 1.5%. Projections raised 2026 CPI from 0.5% to 0.6% and raised 2027 CPI from 0.5% to 0.6%.

- SNB Chairman Schlegel post rate decision press conference noted that policy continued to have expansionary effect; Adjustment of the statement language was appropriate. Would not hesitate to act if needed.

- Inflation will continue to rise in coming quarters before declining in H1 2027.

- ECB's Kocher (Austria) noted that inflation to stay higher for some time and that ECB stood ready to act at any time.

- IMF Chief Georgieva noted that it was appropriate for ECB to hike in Jun; Needed to see whether more tightening is necessary.

- Philippines Central Bank Policy Statement noted that monetary tightening was warranted; inflationary pressures remained strong. Jun decision to hike to keep inflation expectations anchored and mitigate 2nd round effects. Future decisions to be data-dependent but prepared to take further action if needed. Saw 2026 and 2027 CPI above the upper band of inflation target.

- Indonesia Central Bank Policy Statement noted that rate decision was a follow up measure to further strengthen rupiah currency stabilization efforts. Decision was preemptive step to meet inflation goals. Macroprudential, payment system directed at pro-growth. To intensify intervention in FX markets.

- Taiwan Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Steady policy to help maintain stable economic financial development. To adjust policy in a timely way. Current inflation remained mild and economic growth to continue in Q2.

Currencies/fixed income

- USD maintaining a firm tone in the aftermath of Wed FOMC policy statement and SEP projections as the Fed signaled a possible interest-rate rise before year-end. USD steady despite global risk appetite being aided by Pres Trump confirmation that he had signed the US-Iran MOU.

- GBP/USD at 1.32.50and showed a softer tone to the latest UK jobs data. Market participants now awaiting Bank of England's policy decision later in the session today.
EUR/USD trading below the pivotal 1.15 support area by mid-session.

- USD/JPY at 160.60 by mid-session.

- 10-year German Bund yield last at 2.93%, France 10-year Oat at 3.68% and 10-year Gilt yield at 4.76% 10-year Treasury yield: 4.45%; 10-year JGB: 2.59%.

Economic data

- (NL) Netherlands May Unemployment Rate: 3.9% v 4.0%e.

- (UK) May Jobless Claims Change: +31.2K v +8.3K prior; Claimant Count Rate: 4.5% v 4.4% prior; Payrolled Employees Monthly Change: +2K v -23Ke.

- (UK) Apr Average Weekly Earnings 3M/Y: 4.4% v 4.0%e; Weekly Earnings (ex-bonus) 3M/Y: 3.4% v 3.2%e - (UK) Apr ILO Unemployment Rate: 4.9% v 5.0%e; Employment Change 3M/3M: +100K v +73Ke.

- (CH) Swiss May Trade Balance (CHF): 5.1B v 3.3B prior; Real Exports M/M: 5.0% v 2.3% prior; Real Imports M/M: 0.2% v 3.8% prior; Watch Exports Y/Y: 0.4% v -16.6% prior.

- (PH) Philippines Central Bank (BSP) raised the Overnight Borrowing Rate by 25bps to 4.75% (as expected).

- (ID) Indonesia Central Bank (BI) raised the BI Rate by 25bps to 5.75% (as expected).

- (CH) Swiss Central Bank (SNB) left its Policy Rate unchanged at 0.00% (as expected).

- (PL) Poland Jun Consumer Confidence: -9.9 v -11.0e.

- (EU) Euro Zone Apr Current Account Balance: €15.7B v €14.9B prior.

- (PT) Portugal Apr Current Account Balance: €0.4B v €0.1B prior.

- (IT) Italy Apr Current Account Balance: €2.3B v €1.8B prior.

- (GR) Greece Apr Current Account Balance: -€1.4B v -€2.4B prior.

- (NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.25% (as expected).

- (TW) Taiwan May M2 Money Supply Y/Y: 7.8% v 6.5% prior; M1 Money Supply Y/Y: 9.6% v 8.3% prior.

- (TA) Taiwan Central Bank (CBC) left its Benchmark Interest Rate unchanged at 2.00% (as expected).

- (EU) Euro Zone Apr Construction Output M/M: 0.6% v 1.7% prior; Y/Y: 0.9% v 0.2% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.83B vs. €5.0-6.0B indicated range in 2033, 2036 and 2040 SPGB bonds.

- (FR) France Debt Agency (AFT) sold total €13.999B vs. €12.0-14.0B indicated range in 2029, 2032, 2034 Bonds.

Looking ahead

- (IL) Israel Jun 12-monnth CPI Forecast: No est v 1.8% prior.

- (AR) Argentina Jun Consumer Confidence: No est v 40.1 prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.0-1.5B in I/L 2038 and 2040 Bonds (Oatei).

- 06:00 (PT) Portugal May PPI M/M: No est v 2.4% prior; Y/Y: No est v 3.8% prior.

- 06:10 (NL) ECB’s Elderson (Netherlands).

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 3.75%.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 15.00%.

- 07:00 (CA) Canada Jun CFIB Business Barometer: No est v 46.3 prior.

- 08:00 (MX) Mexico Q1 Aggregate Supply and Demand: No est v 4.5% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Initial Jobless Claims: 225Ke v 229K prior; Continuing Claims: 1.79Me v 1.795M prior.

- 08:30 (US) Jun Philadelphia Fed Business Outlook: +10.0e v -0.4 prior.

- 08:30 (CA) Canada May Industrial Product Price M/M: 1.0%e v 2.0% prior; Raw Materials Price Index M/M: 1.1%e v 2.6% prior.

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise 2-Week Repurchase Rate by 25bps to 3.75%.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (CZ) Czech Central bank (CNB) post rate decision press conference.

- 10:00 (US) May Leading Index: 0.1%e v 0.1% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (CO) Colombia Apr Economic Activity Index (Monthly GDP) Y/Y: 3.2%e v 4.0% prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 13:00 (US) Treasury to sell 5-Year TIPS Reopening.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 15:00 (AR) Argentina May Trade Balance: $2.3Be v $2.7B prior.

- 16:00 (US) Apr Total Net TIC Flows: No est v $150.7B prior; Long-term TIC Flows: No est v $81.3B prior.

- 17:00 (KR) South Korea May PPI Y/Y: No est v 4.8% prior.

- 18:45 (NZ) New Zealand May Trade Balance (NZD): No est v 1.9B prior; Exports: No est v 8.6B prior; Imports: No est v 6.7B prior.

- 19:01 (UK) Jun GfK Consumer Confidence: -23e v -23 prior.

- 19:30 (JP) Japan May National CPI Y/Y: 1.5%e v 1.4% prior; CPI (ex-fresh food) Y/Y: 1.4%e v 1.4% prior; CPI (ex-fresh food/energy) Y/Y: 1.8%e v 1.9% prior.

- 19:50 (JP) BOJ Apr Minutes (2 decisions ago).

- 23:30 (JP) Japan to sell 3-Month Bills.