US DATA: Business Inflation Expectations Ease Further
Business unit cost inflation expectations ebbed lower in the Atlanta Fed’s November survey, hitting it lowest since December, whilst realized own price setting reported its lowest for a quarterly question that started in late 2020.
- The Atlanta Fed’s Business Inflation Expectations survey saw a small dip in year-ahead expectations for unit costs from 2.27% to 2.18% in November.
- This is the lowest since Dec 2024 having averaged 2.3% through Jul-Oct, whilst for context it peaked at 2.8% in April on tariff announcements and was a little below 2.0% pre-pandemic.
- This month saw a return of the quarterly question on firms own price setting, with the average firm reporting a 3.1% price increase over the past year. That’s after 4.3% when asked in August and 3.9% in May, hitting its lowest since the question started in late 2020.
- Looking ahead, the average firm expected to increase prices by 3.0% over the year ahead vs 3.9% in August and 5.0% in May. That’s the lowest since mid-2021.
- The median response for price expectations held at 3.0% although has been at 3.0% for 7 of the past 10 quarterly surveys.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURUSD TECHS: Bullish Outlook
- RES 4: 1.1919 High Sep 17 and a bull trigger
- RES 3: 1.1820 High Sep 23
- RES 2: 1.1775 61.8% retracement of the Sep 17 - Oct 9 bear leg
- RES 1: 1.1730 50.0% retracement of the Sep 17 - Oct 9 bear leg
- PRICE: 1.1656 @ 17:09 BST Oct 20
- SUP 1: 1.1602/1542 Low Oct 9 and the bear trigger
- SUP 2: 1.1516 76.4% retracement of the Aug 1 - Sep 17 bull leg
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
The latest recovery in EURUSD has resulted in a clear breach of the 50-day EMA, currently at 1.1671. This undermines a recent bearish theme and suggests the corrective cycle between Sep 17 - Oct 9, may be over. Note that MA studies are in a bull-mode position highlighting a dominant medium-term uptrend. A resumption of gains would open 1.1775 next, a Fibonacci retracement. Key support and the bear trigger lies at 1.1542, the Oct 9 low.
FOREX: NZD Outperforms, Nomura Recommend Long NZDCAD
- New Zealand Q3 CPI came in at 1.0% Q/q overnight, one tenth above market expectations. While the data overall was close to RBNZ expectations, NZD does stand 0.40% higher on the session, assisted by the constructive price action for major equity indices late Monday. Despite the bounce for NZDUSD, bearish conditions remain firmly intact, with the pair remaining just 1.15% above cycle lows at 0.5683, 6-month lows for the pair.
- Interestingly, Nomura hold a contrarian, somewhat upbeat macro view on New Zealand. They believe markets over-reacted to the sharp reported decline in Q2 GDP data, and that overall policy settings are setting the stage for a progressive economic recovery over the coming year. Nomura believe that the easing cycle has – more likely than not already concluded.
- Nomura enter a new long NZD/CAD trade, targeting a move to 0.8315 (~3.6% from entry) by end-December, with a conviction level of 3/5, and with a stop at 0.7900, around 2% from current spot levels. Expressing their positive NZD view against another DM commodity currency also helps to protect a little against externally-driven volatility and swings in global risk sentiment.
CANADA: Initial Analyst Takes See BoC Surveys Supporting Cuts
Odds of a 25bp cut from the BoC on Oct 29 have seen a sizeable increase over the past week, from close to a 50/50 call in the middle of last week before broader risk off and then Gov Macklem helped see dovish moves in the second half. Today's BoC surveys haven't detracted from this, with OIS pointing to 19-20bp of cuts.
- BMO: “BoC Governor Macklem has prioritized risk management amid the ongoing uncertainty surrounding the economic outlook. The Q3 business and consumer sentiment surveys highlight that the net risks continue to tilt negative, especially for the labour market. The Bank of Canada still has tomorrow's CPI report to weigh ahead of next week's decision, although the odds of a cut have risen after these reports.”
- Desjardins: “The latest Bank of Canada surveys underscore the case for additional rate cuts, echoing Governor Macklem’s downbeat remarks from late last week. Responses in both the business and consumer surveys highlighted weakness in the labour market. […] The timing of the Bank of Canada’s surveys make it difficult to interpret the results. That said, with inflation expectations, if anything, lower than what was reported in these surveys and the economy nowhere near full health, we see a strong case for further rate reductions. We continue to forecast two more 25 basis point cuts for this cycle, which would take the policy rate down to 2.00%.”
