US-EU: European Leaders Divided On Deal To Avert Worst Of Tariffs
A number of high-ranking European politicians have expressed their disappointment at the trade deal agreed between US President Donald Trump and European Commission President Ursula von der Leyen over the weekend in Scotland. Most prominent has been French PM Francois Bayrou, who posted on X: “It is a dark day when an alliance of free peoples, united to assert their values and defend their interests, resigns itself to submission”. Chair of the European Parliament's Trade Committee, German MEP Bernd Lange said "My first assessment: not satisfactory. This is a lopsided deal. Concessions have clearly been made that are difficult to accept."
- Trade Commissioner Maros Sefcovic has attempted to defend the deal, claiming in a press conference on 28 July that "This is clearly the best deal we could get under very difficult circumstances,". German Chancellor Friedrich Merz said, "a trade conflict has been averted that would have severely impacted the export-oriented German economy", while Irish Foreign Minister Simon Harris said the agreement gave a "measure of much-needed certainty".
- Others have been circumspect. Danish Foreign Minister Lars Lokke Rasmussen said, “The trade conditions will not be as good as before, and it is not our choice, but a balance must be found that stabilises the situation and that both sides can live with".
- While details on the deal still need to be nailed down, a Commission official raised the prospect of the deal being fast-tracked, rather than being implelemented via a lengthy mechanism (see 'MNI BRIEF:US Deal May Need No Lengthy Ratification-EU Official', 28 July).
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
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
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
- 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.
