US INFLATION: Core PCE Estimates Downgraded To 0.14-0.15% After CPI/PPI
Analysts have mostly downgraded their expectations for May core PCE inflation (released Jun 27) after this week's CPI and then PPI prints came in below-survey.
- Additionally, key PPI-derived inputs into PCE were mixed but appeared to come in on the weaker side of most analysts' expectations, particularly for portfolio management/investment advice.
- The median analyst estimate for May core PCE is now around 0.14-0.15% M/M, compared with 0.22% going into the May inflation data round.
- That would be a second consecutive uptick (after March's 10-month low 0.09%, April was 0.12%) but would still bring the 3M SA annual rate of core PCE inflation down to 1.4% (slowest since November 2020, from 2.7% prior and 4.1% as recently as February). The 6M rate would remain relatively steady at 2.8% (from 2.7% prior) and the Y/Y SA at 2.6% (2.5% prior).
In ascending order of core PCE expectations:
- JPMorgan: 0.12% (0.19% pre-PPI)
- BNP Paribas: 0.13% (0.11% pre-PPI)
- Goldman Sachs: 0.14% (0.18% pre-PPI)
- Barclays: 0.15% (0.22% pre-PPI)
- BofA: 0.16% (0.18-0.24% pre-PPI)
- Nomura: 0.169% (0.348% pre-PPI)
- Morgan Stanley: 0.17%
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US: House Ways And Means Cmte To Mark Up Trump's Tax Agenda Shorty
The House Ways and Means Committee will meet shortly to mark up the tax portion of President Donald Trump's 'Big Beautiful' reconciliation bill. Ways and Means Chair Jason Smith (R-MO) released his final bill text yesterday evening. LIVESTREAM
- The bill reinstates some of Trump's tax requests and drops a last-minute call for a ‘millionaire tax’. It raises the federal debt limit by $4 trillion - lower than the Senate’s proposed $4.5 trillion.
- The bill makes Trump’s 2017 Tax Cuts and Jobs Act permanent, rather than settling for a temporary extension as some analysts predicted.
- The bill includes tax relief for tipped income, seniors, and overtime pay, but only for four years and with income restrictions. Tax relief on social security payments has been dropped in favour of new language on seniors.
- The bill includes deductions for interest on auto loans for US cars, a recent proposal from Trump to bolster domestic manufacturing.
- The bill increases the Child Tax Credit from $2,000 to $2,500 for four years, a campaign proposal championed by Vice President JD Vance (he wanted $5,000).
- Notably, tax credit proposals “appears to amount to a full back-door repeal of the [Inflation Reduction Act]”, according to analysis from Heatmap.
- It provides a source of revenue by raising taxes on university endowments from 1.4% to 21%.
- The bill raises the SALT cap from $10,000 to $30,000, a level SALT Republicans rejected last week.
- Notably, the bill doesn't close the carried interest 'loophole', a win for hedge funds and private equity.
US: Trump's Trade War Leads To Dip In Global Perceptions Of The US
A new Morning Consult/Politico report has found, “The United States is becoming less popular globally in the aftermath of Donald Trump’s return to the White House”.
- “A majority of people surveyed had an overall negative perception of the U.S., marking a steep decline from last year. America’s reputation took a particularly massive hit in EU countries…” likely resulting from hardline rhetoric from Trump on the EU trade practices and hostile posture toward EU democracy.
- Politico notes: “Meanwhile, China kept improving its global standing, overtaking the U.S. for the first time and recording mostly positive perceptions in all regions except Europe.”
Figure 1: “Net global perception of select countries, where negative values indicate negative perceptions and positive percentages indicate positive perceptions”
Source: Politico, Morning Consult
EURGBP TECHS: Maintains A Bearish Tone
- RES 4: 0.8768 High Nov 20 ‘23
- RES 3: 0.8624/0.8738 High Apr 21/ High Apr 11 and the bull trigger
- RES 2: 0.8541/8557 High May 2 / High Apr 28
- RES 1: 0.8468 50-day EMA
- PRICE: 0.8417 @ 16:49 BST May 13
- SUP 1: 0.8403 Low May 12
- SUP 2: 0.8400 Round number support
- SUP 3: 0.8359 1.236 proj of the Apr 11 - 16 - 21 price swing
- SUP 4: 0.8316 Low Mar 28 and a key support
EURGBP traded to a fresh, short-term cycle low Monday. This strengthens the current bearish theme. Note too that the cross has cleared support at 0.8468, the 50-day EMA, signalling scope for a continuation lower. Sights are on 0.8415 next, a Fibonacci retracement. This level has been pierced, a clear break of it would open 0.8400 and below. Key near-term resistance is 0.8541, the May 2 high. A break of this level is required to signal a potential reversal.
