EURJPY TECHS: Bulls Remain In The Driver’s Seat

• Goldman Sachs: "We estimate that the categories we expected tariffs to put upward pressure on prices, including the video and audio products (+1.0%) and photographic equipment (+2.2%) categories, boosted the core by about 3bp this month relative to their prior three-month average contribution."
• JPMorgan: "as one drills down to individual goods, there are some signs of tariff-related increases in their prices. Yet core goods prices rose just 0.06% overall on the month. That doesn’t mean that there will be little to no pass-through of the tariff increases into inflation; indeed, our forecast anticipates a spike in prices by June and July from the tariffs."
• Nomura: "There was no clear sign of tariff impact in April, as tariff-sensitive components have not picked up yet. We expect tariff-induced inflationary pressures to materialize in the coming months. "
• RBC: "We have yet to see core goods pressures from tariffs show up in trade-exposed sectors (though m/m growth remained firm in household furnishings and education and communications commodities)."
• TD: "the main news from the report was that signs of tariff passthrough are becoming more visible. Inflation in the core goods segment moved back to positive at 0.1% m/m, but the underlying strength was stronger when excluding vehicles inflation."
• Wells Fargo: "Thus far there are few signs of tariffs sending goods prices significantly higher. Core goods prices rose 0.1% in April, held in check by flat prices for new vehicles and a dip in prices for used vehicles and apparel. Yet recreation goods, IT goods, household furnishings and other goods rose in April. Excluding autos, core goods prices rose 0.2% to match the strongest gain in a year and a half in a sign that some businesses are trying their hand at higher prices."

As we noted Tuesday after the April CPI release, ("Mixed Evidence Of Tariff Impact On April Goods CPI",  link), we saw evidence of the the impacts from tariff-induced pickups in inflation as mixed - largely confined to isolated categories, with some tariff-sensitive items actually seeing deflation.

• That said, as we pointed out, the biggest hint of a tariff-induced pickup is core goods ex-used vehicles picked up, and the bottom in this CPI aggregate appears to have been in December. There is every reason to believe it will continue increasing in coming months as tariffs come into effect.
• Analysts were themselves mixed on the degree to which there was evidence of tariff passthrough in April's report, though generally it is thought there will be a pickup in the impact in the months ahead. We highlight a few takes below, in alphabetical order of institution:
• BNP Paribas: "While apparel prices took a breather, household furnishings, medical care goods, recreation goods, and information technology goods, and miscellaneous goods all made relatively strong gains on the month. In our view, this is probably the clearest evidence yet of tariff starting to percolate into consumer price data."
• BofA: "There was maybe a hint of tariffs in the data as a few line items with significant imports-household furnishings, medicinal drugs, IT commodities, and toys-saw price increases accelerate this month. But we continue to expect clearer evidence in the months ahead."
• CIBC: "goods prices remain[ed] tame -- including tariff-sensitive categories like cars and apparel. But we're still waiting for the other shoe to drop."
• Desjardins: "It is difficult to see in today’s data a clear-cut impact of the US tariffs "
• Deutsche: "While not particularly widespread, some categories seemed to show initial signs of being impacted by the early February tariffs. Household furnishings and supplies grew by 0.22% (vs. +0.21%) buoyed by an +0.8% gain in appliances, the largest price gain since early 2022. Other recreational commodities also saw large gains, e.g. an 8.8% spike in prices for audio equipment and a 2.2% rise in prices for photographic equipment and supplies."

European yields rose Wednesday for the third session this week, with periphery EGB spreads narrowing.

• Core FI as well as periphery EGBs turned lower in the afternoon session after a mixed morning, despite relatively limited macro and news flow.
• US Treasuries set the tone, trading heavily throughout the day, while also potentially weighing was US President Trump's hint at potential news on the Russia-Ukraine conflict at some point today.
• BoE hawkish dissenter Mann pointed to a more resilient labour market than had been expected, along with concerns that inflation expectations have increased.
• Though Mann's commentary didn't move markets, Gilts underperformed on the day as the UK curve bear flattened; the German curve bear steepened.
• Periphery EGBs' early outperformance faded, with the 10-year BTP/Bund spread briefly moving below 100bp handle for the first time since September 2021, but closing above that mark. GGBs outperformed overall.
• Thursday's calendar includes preliminary Q1 UK GDP data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.4bps at 1.94%, 5-Yr is up 2.4bps at 2.269%, 10-Yr is up 1.9bps at 2.699%, and 30-Yr is up 2bps at 3.146%.
• UK: The 2-Yr yield is up 4.4bps at 4.024%, 5-Yr is up 5.3bps at 4.184%, 10-Yr is up 4.3bps at 4.713%, and 30-Yr is up 4.2bps at 5.469%.
• Italian BTP spread down 0.6bps at 101.2bps /Greek down 2.3bps at 76.5bps