SOUTH KOREA: Country Wrap: Tariff Deadline Draws Near
Jul-28 05:13
- A pivotal week has begun for Korea's economy as the Aug. 1 deadline for potential U.S. reciprocal tariffs draws near. The outcome of the stalled Korea-U.S. trade negotiations could shape the country's economic trajectory for years. With Washington ramping up the pressure and engaging in deals with the European Union and China, it remains uncertain whether Seoul can reach an agreement in time. The landscape is far from favorable. Under the threat of steep tariffs, other countries are conceding market access and pledging large-scale investments to secure deals with the United States. Japan, for example, agreed to open its rice market and pledged $550 billion in U.S.-bound investment, leading to a reduction in reciprocal tariffs from 25 to 15 percent. Bloomberg and other outlets report that the EU is also likely to accept a 15 percent tariff on most goods, including automobiles. (source Yonhap)
- One month after the introduction of tighter regulations on household loans, new applications for such loans have been more than halved, while the growth rate of outstanding loans at major banks has markedly slowed, data showed Sunday. During the first 18 business days of July, the average daily amount of household loan applications, including mortgage and credit loans, submitted to banks totaled 1.78 trillion won ($1.29 billion), marking a 56.5 percent drop from the same number of business days in June, according to the data by the financial authorities. (source Korea Times)
- South Korea's Kospi has been volatile, initially rallying at the open, aiding by a large Samsung chip order (for Tesla) but once again the index has struggled above 3200. Focus remains on US-South Korea trade negotiations ahead of the Aug 1 deadline at the end of the week, with officials set to meet later in the week (reportedly July 31).
- The Won is out of the gate early this week as the strongest regional performer, up +0.35% at 1,378.49.
- The KTB curve is lower, with some steepening as the short end outperforms. KTB 10yr 2.85%
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Jun-27 20:16
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
Jun-27 20:01
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
Jun-27 20:00
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
