EM CEEMEA CREDIT: Magyar Fejlesztesi Bank: Fitch Affirming BBB

J.P.Morgan believe that “the case for the USD lagging the retracement in U.S. equities is strong; the temporary tariff reprieve reduces U.S. recession odds, but is growth positive for rest of the world as well and, on some measures, puts us in the middle of the dollar smile”.

• J.P.Morgan also note that “moreover, the world is still long the USD. Changing EUR/equity correlations are making the case for FX hedges to be increased in the Eurozone, and a rise in USD/Asia would be a distraction in tariff negotiations with the U.S., particularly ahead of the Treasury’s Currency Manipulator report”.
• As a result, they believe that “the bearish case for USD remains intact, but admittedly with lower intensity as the U.S. moderation should no longer be as extreme. Over the medium term, signals on the extent to which U.S. exceptionalism lingers will be more relevant for the dollar”.
• Their “recommended strategy has been a barbelled approach, between cheap recession hedges (JPY longs) and recovery candidates (Scandis, AUD longs)”. They are of the view that “developments this week increase risks for the former with further JPY weakness possible, but improve the backdrop for the latter/cyclical FX with a recovery likely. The view on EUR/USD still remains bullish”.

Whilst a volatile metric month-to-month, the share of core service items growing in excess of 3% Y/Y continued its trend lower in April as it touched the lowest since Sep 2021. 

• The share of the ~190 items across the entire CPI basket growing >3% Y/Y eased from 32% to 29% - see the charts below.
• It was last lower in Dec 2024 and before that Mar 2020. For context, it averaged 24% in 2019 and 19% in 2015-19.
• The share of ~70 items in core goods categories >3% Y/Y dipped back a little further to 14% having recently hit 19% in Feb. It averaged 13% through Oct-Jan having returned to the 12% averaged through 2015-19.
• The share of ~50 items in core services >3% Y/Y fell to 50% for its lowest since Sep 2021 from 58% in March and 63% in Feb. It averaged 38% in 2019 or 34% in 2015-19.  

Tsy quarterly futures roll volumes from June'25 to September'25 rather muted this morning, percentage complete 1-4% across the curve ahead the "First Notice" date on May 30. Current roll details:

• TUM5/TUU5 appr 7,5500 from -8.75 to -8.25, -8.5 last
• FVM5/FVU5 appr 15,700 from -3.5 to -3.25, -3.25 last
• TYM5/TYU5 appr 22,800 from -2.25 to -1.75, -2.0 last
• UXYM5/UXYU5 appr 2,100 from 3.25 to 3.75, 3.5 last
• USM5/USU5 appr 6,700 from 9.25 to +9.75, 9.5 last
• WNM5/WNU5 appr 500 from 5.5 to 5.75, 5.75 last
• Reminder, June futures won't expire until next month: 10s, 30s and Ultras on June 18, 2s and 5s on June 30. June Tsy options, however, expire May 23.