CHILE: BCCh Minutes Due Tomorrow

• Q1 national accounts data are of limited use in the current environment of rapid policy changes under from the second Trump administration.
• Governing Council have previously tried to put more focus on hard data, especially whilst watching for any additional passthrough from soft indicators, but consumer and business surveys are likely particularly important for now when trying to capture reactions to latest policy changes.
• The ECB will have had good visibility at May surveys, important considering the easing of US tariff tensions with the US-UK trade pact on May 8 and then more notably the de-escalation in US-China policies on May 12.
• That includes the Eurozone consumer confidence index a little stronger-than-expected in the flash May release at -15.2 (vs -16.0 cons, collection period May 1-19) after - 16.6 in April, although that was still only the strongest since March and significantly lower than pre-pandemic levels. This does however need a caveat that the correlation between consumer confidence and actual consumption is weak, echoing trends in the US.
• More recently, the flash PMIs softened in flash May readings, with the composite falling from 50.4 to 49.5 for its lowest since Nov 2024, led by German weakness at 48.6. Monday’s final May release for manufacturing was unrevised at 49.4 to confirm a small improvement from the 49.0 in April. The final services reading will be published Jun 4 for one final growth steer ahead of the meeting, having surprised in the flash with a slide from 50.1 to 48.9 for its lowest since Jan 2024. 

• Looking since last ECB decision on Apr 17, Eurozone Q1 GDP was initially reported at 0.35% Q/Q non-annualised in Q1 on Apr 30 before being trimmed to 0.33% in the second release on May 15.
• Whilst revised marginally lower, it was still an acceleration from the 0.24% in Q4 and beat the ECB projection of 0.2% Q/Q from its March forecast round. US tariff front-running has however likely played a significant role, especially in Ireland where real GDP growth jumped 3.2% Q/Q.
• This likely pulling forward of demand has been reflected in both industrial production and international trade releases.
• For context, German GDP increased 0.21% Q/Q, France 0.13%, Italy 0.26% and Spain 0.57%. The full Q1 release, which includes the expenditure breakdown by household consumption, investment and other major components, is released the day after the ECB decision. 

• RES 4: 150.49 High Apr 2   
• RES 3: 149.28 High Apr 3
• RES 2: 147.67/148.65 High May 14 / 12 and a key resistance
• RES 1: 146.28 May 29 high   
• PRICE: 142.75 @ 16:35 BST Jun 2
• SUP 1: 142.12 Low May 27 and a key support
• SUP 2: 141.96 76.4% retracement of the Apr 22 - May 12 bull leg
• SUP 3: 139.89 Low Apr 22 and a bear trigger 
• SUP 4: 138.82 1.50 proj of the Feb 12 - Mar 11 - 28 price swing 

A bear cycle in USDJPY remains in play and the pullback from last Thursday’s high suggests the latest corrective bounce is over. Looking at price patterns, the May 29 session is a shooting star candle - a bearish signal. Key short-term resistance has been defined at 146.28, the May 29 high. A continuation lower would expose 142.12, the May 27 low. Clearance of this level would resume the bear leg.