JAPAN: LDP Confirms General Assembly That Could Decide PM Ishiba's Fate
The governing Liberal Democratic Party (LDP) confirmed on 29 July that its executive committee will call a General Assembly of LDP members of the National Diet 'in the near future'. This could prove pivotal for the tenure of PM Shigeru Ishiba following the disastrous performance of the LDP in the 20 July House of Councillors election. The executive committee's confirmation of the General Assembly meeting follows a 'roundtable discussion' of LDP lawmakers on 28 July.
- LDP Secretary General Hiroshi Moriyama said to reporters the date of the general assembyl is yet to be confirmed. Under party rules, if one-third of LDP lawmakers request a general assembly, "it must be convened within seven days". When asked whether the assembly could see Ishiba formally asked to step down, Moriyama said the process was "very complex".
- The coming days and weeks will see a flurry of political activity. On 1 Aug an extraordinary session of the Diet begins to elect the new president of the House of Councillors. The PM will speak to the House of Representatives to give details of the trade deal reached with the United States. During August, the LDP will undertake an internal review of the House of Councillors' election.
- Bettors continue to see a greater than 50% likelihood that Ishiba is deposed by year-end, although the implied probability according to Polymarket has fallen from 77.8% on 26 July to 66.1% at present.
Chart 1. Betting Market Implied Probability Shigeru Ishiba Leaves Office in 2025, %
Source: Polymarket
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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.
