EURJPY TECHS: Bullish Trend Structure

There doesn't appear to be much more clarity on PCE estimates after today's CPI report, with a wide range of expectations. CPI looks to have lowered those at least somewhat, but there appears to be a wide range of opinion for PPI inputs into PCE due tomorrow, especially the volatile ones. Recall that eight pre-CPI estimates for core PCE saw a median 0.22%/ average 0.24% M/M for May. 

• TD's initial estimate of core PCE is for 0.16% M/M (0.12% headline).
• Goldman now sees 0.18% core PCE (was 0.23% pre-CPI).
• Nomura now looks for 0.348%, down only slightly from their pre-CPI estimate of 0.367%. They note among other PCE-relevant factors: newspapers and magazines and prescription drug prices were strong in CPI and have a larger weight in core PCE, in addition to solid food service inflation which is in the core PCE price index but not CPI (as MNI noted earlier today).
• As Nomura points out, the main area to watch for PCE inputs of PPI - apart from domestic airfares which look to have increased vs a -ve reading in CPI -  is portfolio management and investment advice "(which are roughly correlated with stock prices) declined sharply in April, pushing down monthly core PCE inflation by more than 10bp. However, a sharp rebound in stock prices likely pushed up that component by 4.4% m-o-m in May, after it dropped by 6.6% in April."

• Support for stocks waned in late Wednesday trade, no obvious headline driver as major indexes traded lower. Treasury futures did extend late session highs of 110-23 (+16.5), however, through initial technical resistance (110-19+/20+ 50-day EMA / Jun 11 High).
• Stocks had quickly pared post-CPI data highs amid cautious optimism after several US/China trade related headlines regarding rare earth supply chains rather than tariffs aired this morning. Currently, the DJIA trades up 54.44 points (0.13%) at 43046.38, S&P E-Minis down 12 points (-0.2%) at 6057.75, Nasdaq down 71.7 points (-0.4%) at 19766.81.
• Energy and Health Care sectors outperforming in late trade, while Materials, Consumer Staples and Communication Services sectors continued to underperform.
• Leading gainers included: GE Vernova +3.11%, Broadcom +2.94%, Palantir Technologies +2.70% and First Solar +2.45% while CVS Health +2.05%, Insulet +1.40%, McKesson +1.32% and UnitedHealth Group +1.26%.
• Laggers included Intel Corp -6.77%, Nucor Corp -6.18%, ON Semiconductor -4.48% and Skyworks Solutions -3.08% while Delta Air Lines -4.90%, United Airlines -4.86% and Lockheed Martin -4.57%. Separately, Old Dominion Freight Line -3.38%, Ross Stores -3.23% and Best Buy Co -3.14%.

The federal budget deficit came in a little higher than expected in May, at $316.0B (vs $314.0B consensus and as estimated by the CBO on Monday), per Treasury's monthly statement. That brought the FY2025 fiscal year (Oct-Sep) to date deficit to $1.365T, up $160B from the equivalent period in 2024 and, through the first 8 months, is set for the highest for a full FY in nominal terms since 2021. 

• MNI estimates the 12-month running deficit at around 6.6% of GDP, which is squarely in the middle of Treasury Sec Bessent's estimated 6.5-6.7% of GDP that he mentioned at a congressional committee hearing today.
• Cumulative FY expenditures came in at a new record $4.85T (+7.9% Y/Y)  vs revenue of $3.48T (+5.9% Y/Y). Both are set to reach all-time highs this year.
• The 12-month rolling deficit (which helps mitigate timing and other seasonal issues in the monthly comparisons) of $1.99T represents the third consecutive decline after the recent $2.15T peak in February. The 12-month running total of revenue likewise hit a new all-time high $5.11T, but expenditure continued to rise $7.11T (the all-time-high set in March 2021 at $7.62T).
• It would also represent a widening after 6.4% in FY2024 and 6.2% in FY2023.