CANADA DATA: April Wholesales -2.3% On Autos, Lags -0.9% Flash Estimate

Chancellor Merz concluded his inaugural government declaration, overall remaining close to his CDU/CSU/SPD coalition agreement. Generally, he highlighted making competitiveness a key parameter in economic policy, preserving jobs in industrial manufacturing, and budget consolidation (increasing efficiency of measures) as key goals for his administration. Concrete measures announced include the below:

• Accelerated depreciation on private investment: 30% of acquisition costs deductible per year over 3 years, starting to reduce enterprise taxes in 2028
• Imposition of a 12-year infrastructure package
• New free trade initiative proposed in the EU (mentioning MERCOSUR, US)
• Enabling enterprise formation within 24 hours
• Reduction of reporting obligations for enterprises
• Introduction of an 'early start-retirement pension' (Frühstartrente; from 2026, children from age 6 receive E10/month in an individual, publically funded and privately managed retirement savings account. Fiscal costs costs would amount to ca. E1bln/year)
• CO2 pricing as a core component of climate policy, revenues should not flow into the budget but be distributed Sticking to European climate targets
• Maximum weekly working hours instead of daily maximum to increase labour flexibility
• Government believes the E15/h minimum wage by 2026 is achievable and desirable, but will not enshrine the goal in law - minimum wage commission remains in place
• "Trusting" the agricultural sector: Relying on voluntary action and personal responsibility of farms (this announcement saw a positive reaction in German chemical equities)
• Prioritizing integrating immigrants into the labor market as quickly as possible
• More collective bargaining in the labour market
• Intensify cooperation with Asian partners (mentioning China, some other APAC countries)
• Deepening cooperation with UK on defence

Next in the German domestic politics calendar will be finance minister's announcement of updated tax estimates tomorrow - Handelsblatt sources flagged this will result in a downward revision following lower GDP forecasts ('GERMANY: German Tax Revenue Estimates To Be Downwardly Revised - HB' - May 13).

Spot gold breaches initial support at $3,202.0, the May 1 low, now 1.7% lower on the session. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3164.3, 61.8% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA is at $3164.5 - a key support too.

• There has been a notable ratchet higher in gold futures volumes since NY desks began to filter in today. 2,266 lots traded in Gold futures at 13:36 BST. That's the heaviest volume inside 60 seconds since April 23rd, and has seemingly driven the latest leg lower in spot.
• The moderation in US/China trade tensions has supported global risk sentiment this week, weighing on gold.
• Silver is also softer today, 2% lower on the session at $32.2/oz. A reminder that silver did not participate in the post-Liberation Day rally alongside Gold – seeing price action more similar to US equity futures. However, since April 22 the Gold/Silver ratio has moved away from multi-year highs of 107, currently at 98.8. Initial support is the April 4 low at 97.4. 

TD Securities joins several other sell-side analysts to push back and reduce the outlook for Fed rate cuts in light of the US-China trade war de-escalation.

• TD now eyes consecutive 25bp Fed funds cuts at FOMC meetings in October, December, and January to 3.50-3.75% "as the Committee will try to catch up with policy normalization once the tariff impact is confirmed as largely temporary", with rates cut at a quarterly 25bp pace to to "neutral" 2.75-3.00% by Q4 2026.
• Importantly, "we no longer see the need for the FOMC to ease rates below neutral as we had assumed following the Liberation Day tariffs announcement." As of the May FOMC meeting, TD's forecast was for rates to end the cycle at 2.25-2.50% in June 2026, with the next cut in July 2025 (having pushed back their call from June).
• As far as ascertaining the timing for the next cut, "We now expect the activity and labor market data to prove broadly resilient in Q2 but to lose clear momentum in Q3 as higher prices will start to increasingly dent real incomes and profit margins start to shrink. This should set up the Committee for easing in October. By the time of that meeting, we expect most of the inflation passthrough to have materialized. The September CPI report will be instrumental for confirming that the lion's share of the tariff transmission to consumer prices is over."
• On inflation, "we still look for the bulk of the m/m passthrough to consumer prices to occur in June and July, but now project higher August inflation as well. We now forecast the peak of core CPI inflation to come in at 3.8% in Q3 2025, with inflation closing the year slightly lower at 3.7% q4/q4 in 2025 and at 2.6% q4/q4 in 2026."
• For growth/unemployment: "we still look for below-trend economic growth, but no longer forecast a contraction in Q3 economic activity. We now project GDP growth to close the year at 0.8%, up from our earlier forecast of 0.2% q4/q4. We also estimate the UE rate to rise to 4.6% by the end of the year, down from 4.8% before."