Sticky inflation meets tech weakness

Summary

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Podcast Summary: "Sticky Inflation Meets Tech Weakness"

Podcast: Moving Markets, Julius Baer
Date: June 26, 2026
Host: Helen Frear
Guests: Lucia Caculovic (Market News), Tim Gagy (FX & Metals)

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Episode Overview

On this episode of Moving Markets, the Julius Baer team unpacks the latest global market moves against a backdrop of persistent US inflation and surprising volatility in tech equities. The discussion explores the implications of stubborn price pressures, rate hike expectations, recent performance across global equities, and notable currency and commodity market moves. Special focus is given to how investors can think about opportunity amid uncertainty in both FX and metals.

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Key Discussion Points & Insights

1. US Inflation and Federal Reserve Outlook

[00:32 – 02:22]

• May PCE Inflation: The US PCE (Personal Consumption Expenditures) price index climbed to 4.1% y/y, slightly higher than the previous month. Core PCE (which excludes food and energy) reached 3.4%, its highest since October 2023.
  • “It still highlights that inflation remains stubbornly above the Fed’s 2% target.” — Lucia Caculovic [00:50]
• Consumer Spending: Despite sticky inflation, consumer spending rose by 0.7%, buoyed by larger tax refunds and strength in equities.
• Fed Rate Expectations:
  • Initial readings might suggest further rate hikes, but Julius Baer’s analysts disagree. The reopening of the Strait of Hormuz and mixed labor indicators may take pressure off.
  • “Our analysts currently believe the Fed will remain on hold, keeping the federal funds rate steady for the rest of the year and throughout 2027.” — Lucia Caculovic [02:15]

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2. Equity Markets: Diverging Fortunes

[02:22 – 03:48]

Europe

• Positive Session: Stoxx 600 index hit a new record, led by healthcare stocks. Bayer surged nearly 19% after a favorable US Supreme Court ruling.
• Chipmaker Boost: Infineon, ST Microelectronics, and ASML rose on upbeat forecasts from Micron and Qualcomm.

US

• Mixed Performance: Dow Jones set an intraday high, supported by healthcare, financials, and industrials. NASDAQ suffered its first four-day losing streak since February.
• Tech Weakness:
  • AI stocks remained resilient, but not enough to buoy the sector overall.
  • Apple slipped 6% after announcing price hikes on MacBooks and iPads due to rising memory component costs, with Microsoft also raising Xbox prices.
  • “Micron’s impressive earnings report wasn’t enough to lift the entire tech sector.” — Lucia Caculovic [03:20]

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3. Commodities: Volatility Amid Geopolitical Tensions

[03:48 – 04:38]

• Oil: Prices initially fell, then rebounded on news that Iran would charge substantial fees for Strait of Hormuz transits. However, prices dropped again as the UN paused escort operations after a reported vessel attack.
• Gold: Benefited from easing rate hike fears and a dip in the dollar, but slipped lower again the next morning.
  • “Gold was trading higher yesterday, benefiting from the easing of immediate rate hike fears following the inflation data…” — Lucia Caculovic [04:26]

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4. Asia-Pacific Session: Inflation Surprise and Global Sell-Off

[04:38 – 05:39]

• Japan: Tokyo’s CPI rose to 1.7%, the fastest since December, but Nikkei 225 fell over 4%.
• South Korea: Kospi dropped more than 7%. Small-cap firms fared worse, prompting trading halts.
• Other Markets: Hong Kong’s Hang Seng index was down 1.5%; China’s CSI 300 lost over 2%. Australia and India posted slight gains.

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5. Outlook & Economic Calendar

[05:39 – 06:09]

• Quiet Day Ahead: Just May US goods trade balance and preliminary wholesale inventories expected.
  • “US futures are currently pointing to a softer open. So it will be interesting to see how this Friday unfolds.” — Lucia Caculovic [05:57]

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6. FX Market: Dollar’s New Dynamics

[06:17 – 07:54]

• Dollar Strength Repricing: Recent moves are less about overreaction and more about a reset in expectations as rate cuts are priced out and Fed hikes reconsidered.
  • “It’s not so long ago that multiple Fed cuts were being priced in. And as these cuts have been priced out… interest rate differential becomes ever more painful or appealing depending on which side of it you are on.” — Tim Gagy [06:39]
• Key Levels: EUR/USD dropped below 1.14, a year-long support, affecting returns for recent buyers.
  • “Maybe this means we’re coming to the end of the dollar strength. Maybe this means we get washed out…” — Tim Gagy [07:22]

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7. Metals Market: Pain and Potential Opportunities

[07:54 – 09:24]

• Sharp Selloff: Gold is down about 28% from its January highs; silver over 50%.
  • “Silver is the turbocharged version of gold. The same applies on the way up and on the way down.” — Tim Gagy [08:11]
• Speculative vs. Fundamental Demand: Tim sees a potential pivot in the $3,500–$4,000/oz zone, where fundamentals may resume after the speculative froth dissipates.

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8. Where are the Main Opportunities?

[09:24 – 11:15]

• FX: Attractive levels for derivatives, especially for investors with dollar exposure. Aussie dollar and Canadian dollar are interesting for new positions; commodity currencies remain tricky due to oil volatility.
  • “…if Eurodollar regains its footing above 114, then maybe it can rebuild on that support. But I’m not completely convinced and I would still rather be short Swiss francs.” — Tim Gagy [10:32]
• Yen Volatility: Potential intervention from Bank of Japan could trigger sharp moves—short-dated put options may offer a lower-risk way to play these events.
• Joke to Close: Tim lightens the tone—“I saw an advert in the newspaper for a tv. It was very cheap but it is stuck on full volume. I thought, well, I can’t turn that down.” [11:10]

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Notable Quotes & Memorable Moments

• “It still highlights that inflation remains stubbornly above the Fed’s 2% target.” — Lucia Caculovic [00:50]
• “Our analysts currently believe the Fed will remain on hold, keeping the federal funds rate steady for the rest of the year and throughout 2027.” — Lucia Caculovic [02:15]
• “Micron’s impressive earnings report wasn’t enough to lift the entire tech sector.” — Lucia Caculovic [03:20]
• “It’s not so long ago that multiple Fed cuts were being priced in. And as these cuts have been priced out… interest rate differential becomes ever more painful or appealing…” — Tim Gagy [06:39]
• “Silver is the turbocharged version of gold. The same applies on the way up and on the way down.” — Tim Gagy [08:11]
• “I can’t turn that down.” — Tim Gagy (joke on a TV stuck at full volume) [11:10]

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Timestamps for Key Segments

• [00:32–02:22]: US inflation, Fed outlook
• [02:22–03:48]: Equity markets: Europe & US divergence
• [03:48–04:38]: Commodities: Oil & gold volatility
• [04:38–05:39]: Asia-Pacific: Tokyo inflation and sell-off
• [05:39–06:09]: Economic calendar
• [06:17–07:54]: FX market dynamics
• [07:54–09:24]: Metals selloff and opportunity
• [09:24–11:15]: FX & metals opportunities, closing joke

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Tone & Style

The conversation is brisk, informative, and blends expert insight with practical commentary—characteristic of Julius Baer’s in-house style. The inclusion of a lighthearted joke at the end keeps the tone personable amidst dense financial updates.

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For in-depth context and timely market perspective, this episode delivers clear explanations, actionable commentary, and a timely snapshot of the financial pulse as midyear volatility asserts itself.

Transcript

[A]

Good morning, everyone, and welcome to Julius Baer's Moving Markets podcast. It's Friday 26th June, and my name is Helen Frear. We will kick things off with the latest financial market news as always this morning, provided by my colleague Lucia Caculovic. And then I'll be catching up with Tim Gagy on the latest moves in FX and metals markets. But first up with the market news it is Lucia. Good morning, Lucia.

[B]

Good morning, Helen.

[A]

Let's start with the big picture and inflation. We saw the latest PCE numbers out of the US yesterday. Can you walk us through these figures and what they mean for the outlook, please, Lucia?

[B]

Yeah, sure. So, the PCE price index, which we all know is the Fed's preferred measure of inflation, came in at 4.1% annually in May and accelerating slightly from the previous month. Core PC, which strips out food and energy, reached 3.4%, and this is the highest level since October 2023. While these readings were broadly in line with expectations, they still highlight that inflation remains stubbornly above the Fed's 2% target. However, despite these elevated levels, consumer spending actually increased by 0.7% for the month, and this was driven by larger tax refunds and the ongo strength in equities.

[A]

Okay, that's interesting. So does this hotter than desired inflation data increase the likelihood of further rate hikes from the Federal Reserve?

[B]

Well, initially it might suggest that, but our analysts think otherwise. They believe the reopening of the Strait of Hormuz will ease some inflationary pressures. In addition, looking at broader labor market indicators, the picture is becoming more nuanced. Initial jobless claims actually fell unexpectedly last week, and Q1GD was revised upwards to 2.1%. However, some economists anticipate a slowdown in household spending in the coming months as tax refund benefits fade and savings dwindle. Taking everything into account, our analysts currently believe the Fed will remain on hold, keeping the federal funds rate steady for the rest of the year and throughout 2027.

[A]

Okay, that's good to know. Let's move on to equity markets. Now, Europe enjoyed a pretty positive session yesterday, hitting record highs. What was Dr. Driving this performance?

[B]

Yeah, so European shares really shone, with the Stoxx 600 reaching a record close. Healthcare stocks were a major contributor, particularly Bayer, which surged almost 19% following a favorable ruling from the US Supreme Court that removed a significant overhang for the company. Now, beyond that, some European chip makers, like Infineon, ST Microelectronics and ASML got a boost from the strong forecast from Micron and Qualcomm.

[A]

All right. Things weren't looking quite as rosy in the US though, right?

[B]

Exactly. While the Dow Jones managed to reach a new all time intraday high supported by healthcare, financials and industrials, the NASDAQ composite pulled back and notched its first four day losing streak since February. There was a divergence between AI related stocks and others. Micron's impressive earnings report wasn't enough to lift the entire tech sector. In fact, Apple experienced a sharp decline, falling over 6% after announcing price increases for MacBooks and iPads due to rising component costs, specifically memory. And Microsoft followed suit with price hikes on Xbox consoles.

[A]

Seems like the cost of essential components is starting to bite. Now, let's talk about commodities. Oil prices saw some volatility yesterday. What was driving this?

[B]

Yeah, so initially oil prices were declining. Yesterday, however, they reversed course after reports surfaced indicating Iran plans to impose substantial fees for ships transiting the Strait of Hormuz. But this morning, Helen, prices are lower again. And this comes even as the UN paused its operation to escort ships through the Strait after a vessel reported an attack. Now, as for gold, it was trading higher yesterday, benefiting from the easing of immediate rate hike fears following the inflation data and the subsequent dip in the dollar and treasury yields. But the gold price is lower this morning.

[A]

All right. And turning to the overnight session in Asia Pacific, Tokyo's consumer price inflation picked up from a four year low, rising to 1.7% in June from 1.4% in May. That's the fastest pace since December. How did markets react to this and what was the tone more broadly across the region overnight?

[B]

So Japan's Nikkei 225 slipped more than 4% and it was below the 69,000 level at 1 point. Otherwise, many markets were hit by the sell off in US tech stocks. South Korea's benchmark Kospi plunged more than 7% while the small cap cost stack lost more than 4%, prompting the country's exchange to halt trading on the main index for around 20 minutes. In Australia and India, shares were just slightly higher, but Hong Kong's Hang Seng index was down 1.5%, while China's mainland CSI 300 lost over 2%.

[A]

Okay, and lastly then looking ahead to today, what's on the economic calendar that investors should be aware of?

[B]

So, Helen, overall it looks like a relatively quiet day, perhaps giving markets some time to digest yesterday's developments in the US we'll be watching the May goods trade balance alongside the preliminary wholesale inventories data. US Futures are Currently pointing to a softer open. So it will be interesting to see how this Friday unfolds.

[A]

Wonderful. Thanks a lot Lucia for the great roundup this morning.

[B]

Thanks for having me.

[A]

And now over to you, Tim. Good morning. Firstly.

[C]

Good morning, Helen.

[A]

The dollar demand we saw last week accelerated this week, breaking some important support levels. Do you think the market is overreacting?

[C]

Yeah, I don't think it's quite right to say this move is an overreaction. This is a repricing of the dollar. Somewhere or other we will find the end of this repricing and it will, as always, be blindingly obvious. With the benefit of hindsight, however, for a long time a lot of people were focusing on the dollar debasement trade and it's not so long ago that multiple Fed cuts were being priced in. And as these cuts have been priced out, and we do have to start looking at the possibility of hikes, interest rate differential becomes ever more painful or appealing depending on which side of it you are on. And I also think that maybe there were more dollar shorts out there than perhaps we realized. And it might make sense considering for how long there was a dollar bearish consensus. So we're now below the 114 key support in EURUSD, which has been the bottom for over a year now, which means that anyone who bought euro dollar in the last 12 months bought them at a higher level than right here, not including already the difference of interest against you. The same principle is also true in dollar Swiss, naturally in dollar yen and even in cable, more or less. So maybe this means we're coming to the end of the dollar strength. Maybe this means we get washed out, but it might also mean there's a little bit more to come. Investors may need to move back to the higher yielding dollar. I would be surprised if we've seen the absolute strongest level in the dollar. And I rather suspect that for now we might look to find new ranges in the main pairs, although it's too early to say what those ranges might look like.

[A]

Okay, and moving to metals, but I think the question is really the same. Is this move an overreaction or is there more to come?

[C]

Well, I think in this case the answer might be why not both? We're now down $1,500 an ounce from the high of January in gold, which is about 28%. Pretty painful until you compare it with the drop in silver, which is down over 50% from the top. Silver is the turbocharged version of gold. The same applies on the way up and on the way Down. We see a reluctance now here to touch silver or indeed platinum or palladium. But there's definitely a lot of discussions about gold. The trouble is, while this looks like a decent level to buy some gold, so did 4,500 at the time. So how do you know what to do? So I was looking at a chart yesterday with a colleague and we were trying to work out when the speculative demand overwhelmed the fundamental steady central bank driven buying. The first level that popped out for us was 4,000. So October of last year in the run up to those frenzied December and January moves. And the second level would be somewhere around 3,500, which more or less covers that time after Liberation Day when everyone was trying to work out what to do next. It's not really scientific, but if this 3500-4000 zone is really when the speculative overtook the fundamental, then that might suggest that the fundamental might come back to play somewhere around the same levels. As I said, it's a bit woolly and again too early to say, but if you are looking for an argument for buying gold at the current sort of levels, that is at least one that might make a bit of sense.

[A]

Where do you think the main opportunities are in FX and metals markets at the moment then, Tim?

[C]

I think that really depends on your positioning. Volatility has definitely picked up. So for investors with decent dollar exposure, even dollar cash, there are definitely interesting levels to be had in derivatives, reverse convertibles, selling puts, that sort of thing. As I mentioned earlier, gold is hard to call and depends what you already have. But the levels are attractive. And for those investors who did not take exposure to the Aussie dollar the first time around, the entry point here is also definitely interesting. Commodity currencies like the Norwegian Kroner and the Canadian dollar are tricky given the oil exposure. But the Canadian dollar has really come off a long way and despite the lower yield, there might be something to do there. The low yielders for me are the least appealing. If Eurodollar regains its footing above 114, then maybe it can rebuild on that support. But I'm not completely convinced and I would still rather be short Swiss francs. The yen is tough. I've generally felt that being long yen is a bad idea and I do believe that FX intervention is a complete waste of time for the bank of Japan. However, that does not mean they will not do it. And if for any reason we have a reversal in the recent dollar buying, especially in a low liquidity moment like late this evening, first thing Monday, morning or next weekend they might decide to jump in and try to take advantage. It's very hard to capture and the only way I can see to do it is to buy a fairly short dated put on dollars against yen and put a limit lower down to buy back the dollars that you would be exercised on the put to try and capture a quick move driven by the intervention. Most likely. Honestly, you simply lose the premium. But it's probably less worrying and less expensive than buying yen directly and waiting Finally, Hadan I saw an advert in the newspaper for a tv. It was very cheap but it is stuck on full volume. I thought, well, I can't turn that down.

[A]

Very good. Thank you Tim. Always great to have you on the podcast. So that is all for today. Thank you again to my guest this morning and thank you all for tuning in. Please subscribe to our show if you enjoy it and you can of course also leave us a review on whichever platform you like to listen on. So we'll be back again on Monday morning. Do join us then when I'll be joined by more of our colleagues to talk about what is moving markets. But until then, I wish you all a great day and then a great weekend. Bye for now.

[D]

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