INDIA: Country Wrap: India Proposes Zero Auto Parts Tariffs
- India has proposed zero tariffs on steel, auto components, and pharmaceuticals up to a certain quantity of imports in its trade negotiations with the US on a reciprocal basis. The proposal was made to expedite negotiations on a bilateral trade deal expected by fall this year, with the two nations prioritizing certain sectors to strike an early deal. India has also offered to reconsider its Quality Control Orders and sign a mutual recognition agreement with the US to address Washington's concerns around non-tariff trade barriers. (source BBG)
- The Reserve Bank of India has begun unwinding its short position in the dollar forward book, after a gap of seven months, on the back of a softening dollar, while simultaneously infusing funds via open market operations (OMOs) to counter the resulting liquidity drain. Data from the central bank showed that the net short dollar position in the RBI’s forward book (up to one year) stood at $64.2 billion at the end of March. Including swaps with over one year of maturity, the book stood at $84.3 billion, down from $88.75 billion in February. (Source Business Standard)
- India's PMI Services for April was released today and the result of +58.7 points to the robustness of the services sector even in the face of the trade war. The April print was marginally down from March's +59.1 result with the employment component up to +53.9 from +52.5 and prices charged up over last month. This sees a rise in the HSBC India April Composite to +59.7 from +59.5 in March and shows that the Indian economy remains well positioned to deal with the trade war challenges. The RBI cut rats at its last meeting on April 09 to 6.00% and next meets on June 06. Market implied pricing has just -9bps of cuts priced in over the next 3 months and -61bps over the next year. (source MNI Market News)
- India's NIFTY 50 is down -0.25% in the morning trade following on from yesterday's rise of +0.47% on trade deal optimism. Year to date the NIFTY 50 is up over 3% setting it apart from its regional peers.
- India’s 10YR is weaker today rising +2.5bps in yield to be 6.35%
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AUSSIE 10-YEAR TECHS: (M5) Strong S/T Bounce
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.915 - High Apr 4
- PRICE: 95.860 @ 16:42 GMT Apr 04
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
USDCAD TECHS: Bearish Structure
- RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 3: 1.4415 High Apr 1
- RES 2: 1.4308 50-day EMA
- RES 1: 1.4242 High Apr 4
- PRICE: 1.4196 @ 17:10 BST Apr 4
- SUP 1: 1.4028 Low Apr 3
- SUP 2: 1.3986 Low Dec 2 ‘24
- SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD rallied Friday, but remains lower on the week after Thursday’s downleg. The move down has confirmed a clear reversal of the bull cycle between Sep 25 ‘24 and Feb 3. Price is through a key support at 1.4151, the Feb 14 low. This signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4308, the 50-day EMA.
CANADA DATA: Unexpected Jobs Contraction Boosts Implied April BOC Cut Chances
Canadian employment unexpectedly contracted in March, falling by the most since January 2022 at -32.6k (+10.0k expected, +1.1k prior) in a sign that the trade war with the US is spilling over increasingly into the "hard" data. The unemployment rate ticked up 0.1pp to 6.7%, in line with expectations and below the November 6.9% high, though unrounded it rose from 6.55% to 6.71% - the largest increase since November.
- The drop in employment was largely due to a 62.0k drop in full-time positions (after -19.7k, the 2nd straight drop), with part-time up for the 4th consecutive month at 29.5k (after 20.8k prior) - that mix is clearly indicative of hiring uncertainty among firms.
- The monthly full-time drop was the 2nd largest since the pandemic lows in the labour market (April 2020). Goods producing jobs fell by 12k (2nd consecutive decline), while services shed 21k (wholesale/retail trade and Information, culture and recreation led losses).
- The participation rate dipped 0.1pp to 65.2%.
- Wages were soft, dropping 0.2% M/M for the first drop since November, with the Y/Y rate slipping to 3.6% from 3.8% prior. The rise in permanent employees' wages of 3.5% Y/Y was well below the 4.1% expected (4.0% prior).
- Market-implied probability of an April BOC rate cut rose to as high as 68% after the data before settling the day at around 55%. That compares to 40% prior to Wednesday's US tariffs announcement.
