EM CEEMEA CREDIT: Ford Otosan: S&P downgrade

Although Norges Bank is not under pressure to cut rates due to a relatively resilient mainland economy, the unwind of Q1 inflationary pressures (which delayed the first cut back in March) suggest there is scope to ease at least once in H2 - in line with the March MPR rate path.

• Seasonally adjusted CPI-ATE prices rose 0.08% M/M for the second consecutive month in May, and have now been consistent with 2% inflation on an annualised basis since March. 3m/3m momentum pulled back to 2.95% (vs 4.11% in April, 4.22% in March) for the lowest since November 2024.
• Looking at NSA data, services excluding rents fell to 3.04% Y/Y (vs 4.31% prior). As expected, airfares were the largest contributor here, falling 9.78% Y/Y (vs +26.07% prior). However, recreation and culture and restaurant and hotels components also eased somewhat in May.
• Rents decelerated to 3.62% Y/Y (vs 3.88% prior), the lowest since April 2023.
• Domestic goods ex-energy rebounded to 5.38% Y/Y (vs 4.51% prior), while imported goods rose to 1.02% Y/Y (vs 0.31% prior). Food prices rose to 5.05% Y/Y (vs 3.12% prior), following Easter sales in April. Meanwhile, trends in clothing and footwear and furniture and household equipment remain soft. The strengthening NOK appears to be containing imported price pressures.
• Electricity including grid rent pushed up headline inflation, accelerating to 16.82% Y/Y (vs -5.21% prior) on a base effect. Norges Bank should look through this price action.

• The Dollar is now closer to flat against all G10s, although it might not fully reflect some of the Overnight moves, albeit still contained.
• The early overnight mover was the Yen following Dovish leaning comment from Ueda, USDJPY spiked above 145.00, to register a 145.29 high, its best level in 8 sessions.
• But the USDJPY has fully reversed to trade near the intraday low, looking at the timing, the bid in the Yen emerged on that sudden leg lower in the Risk Tone.
• Initial support in the USDJPY will be seen at 143.98, Yesterday's low.
• The Pound is the early loser, and extending early losses, now down 0.28%, the UK Employment miss has been the driver, and next support in Cable comes at 1.3462 20-day EMA.

• RES 4: 6124.00 High Feb 24     
• RES 3: 6080.75 High Feb 26  
• RES 2: 6057.00 High Mar 3
• RES 1: 6040.75 Intraday high  
• PRICE: 6013.25 @ 07:19 BST Jun 10  
• SUP 1: 5896.00/5798.36 20- and 50-day EMA values
• SUP 2: 5756.50 Low May 23    
• SUP 3: 5596.00 Low May 7
• SUP 4: 5455.50 Low Apr 30

The trend condition in S&P E-Minis is unchanged, it remains bullish and the contract has again traded to a fresh cycle high, today. The recent break of 5993.50, the May 20 high and a bull trigger, highlights a resumption of the uptrend and maintains a price sequence of higher highs and higher lows. A continuation would open 6057.00 next, the Mar 3 high. Key support lies at 5798.36, the 50-day EMA.