FOREX: EUR and MXN Unfazed by Latest Global Tariff Developments
Jul-14 09:21
- Despite President Trump threatening to impose 30% tariffs on the EU and Mexico, both the Euro and the Mexican peso have taken the news in their stride as markets remain cautiously optimistic that more lenient deals may be struck before the August 01 deadline. These limited reactions, and the lack of data on Monday keeps the dollar index within close proximity to Friday’s close.
- For EUR specifically, the brief bout of initial weakness did prompt a fresh pullback low at 1.1651 and notably, the 20-day EMA has been pierced. However, the lack of follow through shows that these shallow dips remain corrective, keeping bullish sentiment firmly intact for now. The July 01 high of 1.1829 remains the bull trigger for the pair.
- In similar vein, the USDMXN trend remains bearish, reinforced by fresh cycle lows for the pair last week. Potential is seen for a bearish extension towards 18.4302, the Aug 01 low.
- Elsewhere in G10, the likes of AUD and NZD are both underperforming in G10, however, it’s the Kiwi’s relative weakness that is helping AUDNZD extend its most recent upswing. The cross looks set to extend its winning streak to six consecutive sessions, shifting the upside target to 1.1032, the April 01 high.
- Tuesday’s data calendar is stacked with China activity figures kicking things off. The focus will then swiftly turn to US and Canadian inflation data, final inputs before both the Fed and BOC decisions on July 30. We will also have the beginning of quarterly earnings season with financials the usual early focus.
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US FISCAL: Available Extraordinary Measures Pick Up Ahead Of Tax Date
Jun-13 20:42
Treasury had $144B in "extraordinary measures" available to keep the government financed as of June 11 per a release Friday. That is up from $84B a week earlier and the highest since April 28.
- However, TGA cash continues to fall, to $309B latest (lowest since early April) Combined with a pullback in Treasury cash ($376B), keeping the total resources available to avert an "x-date" in the summer at around $450B .
- There will be another uptick in Treasury cash in the coming days, and it's likely Treasury allowed some of the extraordinary measures to be rebuilt (ie not exercised) in anticipation of more cash coming in.
- This is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
FED: Two Cuts Priced This Year Headed Into FOMC Week
Jun-13 20:28
As we head into the June Fed meeting week, market pricing is reflective of the FOMC’s messaging (that we describe in our preview):
- The next cut is only fully priced by the October FOMC meeting, with September seeing a roughly 80% implied probability of bringing the next 25bp reduction.
- Exactly 50bp of cuts are priced through end-2025, implying two Q4 cuts.
- That’s a shift from just after the May meeting, after which the next cut was fully priced by September, and there were closer to three cuts priced for the rest of the year.
- Overall cuts are seen backloaded this year (after 15bp in September, 29bp of cuts priced in Q4 - Oct/Dec combined), but falls off in Q1 (just 21bp cuts priced, 9bp of cuts priced for January and 12bp for March)
FED: Summary Of Economic Projections: Higher 2025 Inflation, Weaker Growth
Jun-13 20:21
The MNI Markets Team’s expectations for the updated Economic Projections are below.
- As of the May meeting, the Federal Reserve staff – whose outlook tends to be broadly shared by the median Committee member – revised their forecasts for growth weaker in 2025 and 2026, “as announced trade policies implied a larger drag on real activity relative to the policies that the staff had assumed in their previous forecast. Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years. With the drag on demand expected to start earlier and to be larger than the supply response, the output gap was projected to widen significantly over the forecast period. The labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027."
- On inflation, "The staff's inflation projection was higher than the one prepared for the March meeting. Tariffs were expected to boost inflation markedly this year and to provide a smaller boost in 2026; after that, inflation was projected to decline to 2 percent by 2027."
- Our expectations for these changes fall somewhere in between those projections and the March SEP – a slightly higher unemployment rate, substantially higher inflation in 2025 but to a lesser extent in 2026, and weaker GDP growth this year. Longer-run variables should be unchanged.
MNI Markets Team Expectations For June 2025 Summary Of Economic Projections Medians
