ECB: Macro Since Last ECB: Growth - Mfg PMIs Finally In Positive Territory [2/2]

Political consultant Bruce Mehlman notes on his Substack that Artificial Intelligence could reduce the number of competitive seats in the House of Representatives in the future, increasing partisanship in Congress.

• Mehlman: “AI promises gerrymandering on steroids — weapons of mass division in the 2025 redistricting wars — with powerful AI models able to (1) precisely-sift unprecedented amounts and unprecedentedly-personal data, (2) compare unlimited potential maps to optimize outcomes. But while AI-enabled cramming could reduce the paltry 20% of seats that are currently competitive, AI-drawn maps might also create more competitive seats by shifting voters out of safer seats (where risk-averse incumbent politicians often prefer them).”
• The report comes amid an acrimonious partisan dispute over redistricting, a process which could determine the balance of power in Congress at the 2026 midterm elections. 

Figure 1: Share of Competitive and Partisan House Seats, Over Time

Source: Bruce Mehlman, Cook Political Report

• RES 4: 1.3681 High Jul 4
• RES 3: 1.3620 High Jul 10 
• RES 2: 1.3589 High Jul 24 
• RES 1: 1.3477 Low Aug 11
• PRICE: 1.3410 @ 15:28 BST Aug 11
• SUP 1: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
• SUP 2: 1.3041 Low Apr 14
• SUP 3: 1.3000 Round number support 
• SUP 4: 1.2945 50.0% retracement of the Jan 13 - Jul 1 bull cycle   

Prices traded higher early Monday before fading into the close. Nonetheless, recent price action builds on the gains posted after the break of the 50-day EMA on the hawkish turnout to the August BoE rate decision. This firms the speed of the recovery off the 1.3142 pullback low and signals a greater probability of a bullish reversal. For now, S/T momentum is still pointed higher, with the Jul 24 high of 1.3589 the next notable upside level. While the bounce off the pullback low persists, the more medium-term trend remains bearish - but the risk of a return to recent lows has fallen.

Takeup of the Fed's overnight reverse repo facility ticked up by around $2B to $82.2B Monday, the second consecutive daily increase but the 5th day in 6 below the $100B mark.

• ON RRP takeup has averaged $91B in the first 7 sessions of August, compared with $225B over the first 7 sessions in July.
• Helping reduce appetite for ON RRP is the rise in bill issuance since the debt limit was lifted in early July - a dynamic that is expected to keep a lid on the facility for the foreseeable future (outside of spikes typically seen at month-/quarter-end).