AUSSIE BONDS: Futures Modestly Richer, Bus Survey Shows Pick Up In Labour Costs
Jun-10 04:51
ACGBs (YM +2.0 & XM +3.0) are modestly stronger after today’s confidence data.
- NAB business price/cost components in May were mixed, containing elements of concern and optimism. The pickup in labour costs in addition to signs that wage growth is rising again, is likely to be monitored closely. The employment component of the survey though was very weak, which may pressure pay gains.
- Westpac's measure of consumer confidence rose 0.5% in June to 92.6 after May's 2.2% increase, boosted by 50bp of RBA easing this year and lower inflation. The index is at its highest since January, but still 1.8% below that level as global events have weighed on sentiment.
- Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's modest rally.
- Cash ACGBs are 3bps cheaper after yesterday's holiday with the AU-US 10-year yield differential at -18bps.
- The bills strip has twist-flattened, with pricing -3 to +2.
- RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in July is given an 82% probability, with a cumulative 73bps of easing priced by year-end.
- Tomorrow, the local calendar will be empty.
- The AOFM plans to sell A$1000mn of the 1.75% 21 November 2032 bond tomorrow.
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
