US BASIC INDUSTRIES: Freeport: 3Q25 Results

The US current account deficit was a little smaller than expected in Q2 2025, at $251B, vs $257B expected (prior revised to $440B from $450B - all figures rounded).

• This was the smallest deficit in nominal terms since Q4 2023, but comes after a record shortfall the prior quarter. The implied 3.3% of GDP deficit was the smallest since Q3 2023, after 5.9% in Q1. The swings were of course exaggerated primarily by tariff-related trade shifts, but when we average the two quarters out, the deficit comes out at $346B.
• That's wide by historical standards (the prior 8 quarters averaged $254B), with the difference again being the goods trade deficit of $368B on average the first half of the year ($284B 8-quarters prior average). The services trade surplus averaged $80B in H1, vs around $74B the prior 8 quarters, so a slight improvement there in line with the historical average, even as the primary and secondary income accounts showed slightly smaller deficits - see chart as % of GDP.
• We get August advance goods trade data on Thursday - it's expected to see a smaller deficit of $95B vs a surprisingly high $103B in July. Consensus for the current account sees a small narrowing over the coming quarters, from an average 4.6% of GDP in H1 to 4.0% by mid-2026.
• One key to the current account outlook is portfolio income: as US yields have risen, the % of GDP paid out to the rest of the world has neared 2.0% (1.8% in the latest quarter) of GDP from 1.5% in 2022, while credits received have been static at 0.6%, reflecting the negative international portfolio investment position.
• While this has been offset by an improvement in net direct investment income, that widening in the portfolio category accounts for about 0.4-0.5pp of the current account deficit, and doesn't look likely to abate in the near future. The investment income balance used to represent a strong surplus for the US current account (+1% of GDP) but has been flat for the last couple of years.

• RES 4: 177.08 2.000 proj of the Feb 28 - Mar 18 - Apr 7 price swing 
• RES 3: 175.43 High Jul 11 ‘24 and a key medium-term resistance
• RES 2: 174.86 1.764 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• RES 1: 174.50 High Sep 19 
• PRICE: 174.30 @ 20:15 BST Sep 23
• SUP 1: 173.14/171.93 20- and 50-day EMA
• SUP 2: 170.97 Low Aug 14 
• SUP 3: 169.73/45 Low Jul 31 / 23.6% of the Feb 28 - Jul 28 bull leg 
• SUP 4: 168.46 Low Jul 1   

The trend set-up in EURJPY is unchanged, it remains bullish and price is trading at its recent highs. The cross last week breached resistance at 173.97, the Jul 28 high and a bull trigger. This confirms a resumption of the medium-term uptrend and maintains the price sequence of higher highs and higher lows. Sights are on 174.86, a Fibonacci projection. On the downside, first support to watch lies at 173.14, the 20-day EMA.

• US Treasuries look to finish near late session highs after holding lower/narrow range for much of the session.
• Tsys gained slightly after flash PMIs come out slightly lower than expected: flash US PMIs brought a 2-month low for Manufacturing at 52.0 (52.2 consensus, 53.0 prior) and a 3-month low for Services at 53.9 (54.0 consensus, 54.5 prior), but both readings were pretty much in line with consensus and suggest an economy in expansionary territory.
• Fed speak elicited muted reactions: Atlanta Fed Bostic's longer-run dot suggests limited impetus to cut further, while Chicago Fed Goolsbee calls current policy "mildly restrictive" and points to a neutral rate 100-125bp lower than current rates.
• Even Chair Powell's outlook didn't deviate much if at all from last week's FOMC press conference as "two-sided risks mean that there is no risk-free path." Treasuries gained after around Chairman Powell speech as block buy over 10k TYZ5 added impetus to move.
• Little reaction in Tsy futures after the latest $69B 2Y note auction (91282CPB1) comes out on the screws: 3.571% high yield vs. 3.571% WI; 2.51x bid-to-cover vs. 2.69x prior.
• Light data again tomorrow: New Home Sales and Building Permits scheduled. SF Fed Daly economic outlook, moderated Q&A after the close. Main focus is on Thursday's heavy data drop: Personal Consumption, GDP, Durables/Cap Goods, and weekly claims.