EM LATAM CREDIT: Colombia Government Tax Hikes: Positive Take

The Bundesbank’s estimate of seasonally-adjusted German CPI suggests April sequential services inflation momentum was the highest since May 2024. While that will have been pushed upwards from Easter Effect one-offs, and residual seasonality appears to persist in the SA time series, the print underscores that services inflation remains sticky in Germany. 

• Services inflation accelerated to 0.43% M/M (sa) in April (vs 0.26% prior, 5.3% annualized), while manufactured goods ex-energy continued to run soft at 0.08% M/M SA (vs 0.25% prior, 1.0% annualized).
• This left sequential core CPI SA at 0.17% M/M (0.26% prior, 2.1% annualized).
• However, markets appear to be looking through this latest services strength. Dec-25 Euribor futures continue to trade not too far off dovish extremes seen mid-April, with around 66bp of easing priced through December. 

• It comes as a) core goods inflation is soft, and b) analyst and ECB expectations are increasingly expecting EZ headline inflation returning to target around end-2025 amid the firmer US tariff stance. US trade policy of course has tilted the ECB Governing Council's focus towards growth instead of inflation risks.

   

• RES 4: 1.1696 1.618 proj of the Feb 28 - Mar 18 - 27 price swing 
• RES 3: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
• RES 2: 1.1608 High Nov 9 2021
• RES 1: 1.1440/1573 High Apr 23 / 21 and the bull trigger  
• PRICE: 1.1347 @ 16:25 BST Apr 30
• SUP 1: 1.1308 Low Apr 23
• SUP 2: 1.1251 20-day EMA and a key support    
• SUP 3: 1.1144/1002 High Apr 3 / 50-day EMA and a pivot level     
• SUP 4: 1.0805 Low Apr 3  

The recent pullback in EURUSD is considered corrective and the trend structure is unchanged, it remains bullish. MA studies are in a bull-mode position signalling a dominant uptrend, and the latest move down is allowing an overbought condition to unwind. A resumption of gains would open 1.1608 next, the Nov 9 2021 high. Key support is at the 20-day EMA, at 1.1251. A break of this average would signal scope for a deeper corrective pullback. 

• The USD index is moderately firmer Wednesday following the plethora of data releases from the US. Slightly softer Q1 US GDP and Chicago PMI prints were countered by higher PCE, which continue to stoke stagflationary concerns for the US economy. However, the data providing a stale picture, month-end flow dynamics and the close proximity to the employment report on Friday have kept overall FX ranges contained.
• Weaker sentiment was greater reflected by the slippage for major equity benchmarks, which has translated into a 0.2% uptick for the DXY to 99.45. The index continues to consolidate below the 100 mark as the underlying bearish USD trend remains intact at this juncture.
• GBP stands out as the weakest performer across G10. The Friday/Monday daily candles for GBP/USD form a tweezer top - the first real bearish candle pattern on the daily chart since January. A further slide in the pair sees first support into 1.3280, ahead of the 20-day EMA at 1.3202.
• Elsewhere, broad EUR weakness played out in the aftermath of month-end, prompting EURUSD to press fresh weekly lows below 1.1330. While the recent pullback in EURUSD is considered corrective and the bullish trend structure is unchanged for now, the pair’s ability to gain traction above 1.14 this week appears a relatively bearish development at the margin.
• A break of the April 23 low at 1.1308 would focus the market on key support at the 20-day EMA (1.1251), of which a break would signal scope for a deeper corrective pullback towards 1.1144 initially.
• Weaker equity sentiment countered higher-than-expected CPI figures in Australia. Notably, AUDUSD has traded either side of the 0.6400 handle for eight consecutive trading sessions, with bullish trend conditions still in play, but the pair unable to build any lasting momentum above the February highs around 0.6410.
• Thursday focus turns to the Bank of Japan decision before US ISM Manufacturing PMI. Liquidity may be negatively impacted as a number of nations will be off for the Labour Day holiday.