MEXICO: Analyst Views On Bi-Weekly CPI Data/Banxico Rates
Aug-22 16:18
- Banorte says that the downside surprise to inflation was due to a moderation in goods inflation within the core basket. They also note the decline in agricultural prices, while energy price effects were very limited again. Yesterday’s Banxico minutes support the board members’ dovish tone and Banorte continues to forecast a 25bp cut to 7.50% in September and a 7.00% year-end rate.
- Itaú also notes the unexpected significant improvement in core inflation dynamics, which is now considerably better at the margin. The improvements in both tradables and services core inflation are good news for Banxico. Itaú still anticipates another 25bp cut in September, with all options on the table beyond that, including pausing or continuing the easing cycle. However, their global scenario for only one 25bp Fed cut in December aligns with a 7.5% year-end Banxico rate.
- Meanwhile, Scotiabank expects core inflation to remain persistent in the upcoming readings, which will be key for Banxico’s decisions. Yesterday’s minutes highlighted the continued focus on inflation, particularly core, as well as the US-Mex rate spread. However, several members suggested maintaining the current easing pace for upcoming meetings. As such, Scotia maintain their 7.50% year-end rate forecast, but with a downward bias, subject to CPI data and the Fed’s stance.
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TARIFFS: US And EU Closing In On 15% Tariff Deal - FT
Jul-23 16:08
The Financial Times reports that the United States and European Union are closing in on a deal that would impose 15% tariffs on European imports, potentially heading off a threat issued by President Donald Trump earlier this month to hit the EU with a 30% tariff rate on August 1.
- FT notes: "Both sides would waive tariffs on some products, including aircraft, spirits and medical devices... [sources] said they understood the 15 per cent minimum tariff would include those existing duties, so Brussels views the deal as cementing the status quo. Tariffs on cars, which are currently 27.5 per cent, would therefore fall to 15 per cent."
- FT adds: "The bloc will continue to prepare a possible €93bn package of retaliatory tariffs, set at up to 30 per cent, in case they cannot agree a deal by August 1, the people said. A US official said the situation was fluid and subject to change."
- Bloomberg reported earlier that, absent a trade deal by August 1, the EU would "quickly hit the US with 30% tariffs on some €100 billion ($117 billion) worth of goods." The first wave of countermeasures would combine "an already approved list of tariffs on €21 billion of US goods and a previously proposed list on an additional €72 billion of American products into one package".
- Trump said on Truth Social earlier: "I WILL ONLY LOWER TARIFFS IF A COUNTRY AGREES TO OPEN ITS MARKET. IF NOT, MUCH HIGHER TARIFFS!"
US TSYS: Extending Lows on US/EU Trade Chatter
Jul-23 16:04
- Bit of classic risk-on at midday, Treasuries are extending lows, stocks climbing to new highs after Financial Times article posits the US & EU "close in on 15% tariff deal".
- Tsy Sep'25 10Y contract trades -12.5 at 111-00.5 (low) - nearing initial technical support at 110-30/08.5 (50-day EMA / Low Jul 14 & 16).
- Curves still mixed: 2s10s +0.353 at 51.204, 5s30s -0.618 at 102.429.
- Cross asset: Bbg US$ index retreats: BBDXY -1.55 at 1194.25; SPX eminis new high of 6385.0; gold down 41.58 at 3390.06.
EGBS: EGBs Slip On FT Report That EU-US Closing In On 15% Tariff Deal
Jul-23 16:01
- A swift sell-off in EGBs on the back of that FT report, 2Y German yields 3bp higher for the same increase on the day.
- RXA slides ~35 ticks to a low of 130.17, but still some way off testing support at 129.73 (Jul 21 low).
