FED: Beige Book: Inflation Seen Rising More Rapidly By Late Summer (1/3)
Jul-16 18:24
The July Beige Book's description of inflation suggested relatively steady price pressures compared with the June report, though it seems that what were previously "plans" to pass through tariff-related costs to customers have begun to materialize.
- In probably the most important finding for the FOMC, the biggest price increases are yet to come: "Contacts in a wide range of industries expected cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will start to rise more rapidly by late summer."
- District-by-district, 4 Feds reported selling prices increased "modestly" (Boston, Philadelphia, Cleveland, San Francisco), 6 "moderately" (New York, Richmond, Atlanta, Chicago, St Louis, Kansas City), one "eased" (Minneapolis) and one "steady" (Dallas).
- The table below summarizes the recent evolution of the Beige Book's inflation characterization. (Our characterization is derived from the individual Fed reports, not the overall summary.)
- From the July report: "Prices increased across Districts, with seven characterizing price growth as moderate and five characterizing it as modest, mostly similar to the previous report. In all twelve Districts, businesses reported experiencing modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction. Rising insurance costs represented another widespread source of pricing pressure. Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges, although some held off raising prices because of customers' growing price sensitivity, resulting in compressed profit margins. Contacts in a wide range of industries expected cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will start to rise more rapidly by late summer."
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EURGBP TECHS: Bull Cycle Intact
Jun-16 18:00
- RES 4: 0.8624 High Apr 21
- RES 3: 0.8592 61.8% retracement of the Apr 11 - May 29 downleg
- RES 2: 0.8566 High Apr 24
- RES 1: 0.8547 High Jun 12
- PRICE: 0.8515 @ 17:21 BST Jun 16
- SUP 1: 0.8476/8447 Low Jun 12 / 50-day EMA
- SUP 2: 0.8407/8356 Low Jun 4 / Low May 29 and the bear trigger
- SUP 3: 0.8327 1.382 proj of the Apr 11 - 16 - 21 price swing
- SUP 4: 0.8316 Low Mar 28 and a key support
A bullish theme in EURGBP remains intact and last week’s gains reinforce current conditions. The cross has cleared the 50-day EMA and the subsequent bullish follow through, highlights a stronger reversal. This signals scope for a climb towards 0.8592, a Fibonacci retracement. Support to watch lies at 0.8447, the 50-day EMA. Clearance of this level would highlight a possible reversal.
FOREX: AUD and NZD Outperforming Amid Firmer Risk Sentiment
Jun-16 17:37
- The US dollar is underperforming on Monday, as more benign price action across the energy and equity markets is conveying a more stable risk backdrop. WTI and Brent crude futures are roughly 7% off the earlier highs, while the e-mini S&P 500 tracks around 1% in the green to start the week.
- As such, the likes of AUD and NZD have been key beneficiaries within G10, largely mirroring the price action for the major equity benchmarks. AUDUSD has been testing an important resistance point at 0.6550, the Nov 25 high, and a close at current levels would be he highest in 7 months, potentially signalling scope for a stronger recovery to the US election related highs at 0.6688.
- The EUR has also recovered, briefly rising to a session high of 1.1615. The rally has moderated as we approach the APAC crossover as spot deals close to 1.1580 at typing. Sights remain on 1.1696 next, a Fibonacci projection, as the technical uptrend remains firmly in place. Relative underperformance for the safe havens has elevated EURJPY to the highest level since July last year. A positive close today for the cross would be 8 consecutive winning sessions, with sights now on a couple of daily highs at the 168.00 mark.
- USDJPY stands a touch higher Monday, but still managed to establish a 110 pip range on the session, keeping attention on the pair high as we approach tomorrow’s BOJ decision and press conference. 145.46 and 142.12 appear the key short-term parameters for the pair.
- Elsewhere on Tuesday, German ZEW figures are scheduled, before US retail sales and import price data are due.
PIPELINE: Corporate Bond Update: $3.5B EOG 4Pt Launched
Jun-16 17:35
- Date $MM Issuer (Priced *, Launch #)
- 06/16 $4B Hungary $1.5B +5Y +145, $1B +10Y +175, $1.5B +30Y +195
- 06/16 $3.5B #EOG $500M 3Y +50, $1.25B 7Y +80, $1.25B +10Y +90, $500M 30Y +100
- 06/16 $2.25B #Enbridge $400M 3Y +67, $600M 5Y +87, $900M 10Y +112, $350M tap 04/05/54 +122
- 06/16 $700M Unisys 5.5NC2.5 10.5%a
- 06/16 $500M #Atmos Energy 10Y +80
- 06/16 $500M #Kimco Realty +10Y +92
- 06/16 $Benchmark EIB 7Y SOFR+53a
- 06/16 $Benchmark America Movil +7Y +110a
- 06/16 $Benchmark IBK 3Y SOFR+58a, 5Y +45a
- 06/16 $Benchmark Islamic Development Bank Sukuk 5Y SOFR+58a
