EM ASIA CREDIT: Momentive Performance Materials: New USD 3Y Priced

• That being said, latest readthrough to core PCE inflation paints a less hawkish picture. With August CPI and PPI inputs to hand, analyst unrounded estimates appear to be centered around core PCE inflation of 0.20% M/M, or at least a median around there with a risk of being a little higher.
• If accurate, that would follow 0.27% M/M in July and 0.26% M/M in June, implying some moderation after a string of more clearly above-target prints. Assuming no revisions, it would see year-ago core PCE inflation of 2.9% Y/Y (vs 2.7% in January at the start of the Trump administration) and with a three-month rate only modestly higher at 3.0% annualized.
• The median FOMC forecast from June eyed an average 3.1% Y/Y for 4Q25.
• For broader context, monthly tariff revenues were worth circa 1.8% of overall personal consumption expenditure after a 1.3pp increase under the Trump administration. This only gives a sense of aggregate potential adjustment, with the burden split across importers, businesses and consumers. This aggregate impact has room to increase further judging by actual tariff revenue as a share of imports compared to effective tariff rates. 

The two rounds of CPI/PPI reports since the July FOMC decision have on balance seen strong monthly rates of inflation in both July and August, broadly meeting expectations rather than really accelerating higher. 

• Core CPI inflation of 0.32% M/M in July and 0.35% M/M in August has been impressively close to the median unrounded analyst estimate and has helped push the year-ago rate to 3.1% Y/Y for its highest since February.
• We put some focus on our calculation of median core goods inflation to better track potential tariff-related pressures coming through the pipeline. It continues to run at a strong monthly pace, with three of the past four months at 0.3% M/M plus June at 0.44% M/M, but it’s notable that June has been the peak for broad monthly price increases in core goods items for now.
• We’ve also given some attention to a push higher in food price inflation, with at-home prices rising 0.6% M/M in August for a three-year high, as its partially non-durable nature should mean there was less able to have front-run tariffs earlier in the year (i.e. tariff passthrough should be faster).
• Core services inflation has also increased strongly, with 0.365% M/M in July and 0.35% M/M in August, with July’s print described as “dangerous” by a usually dovish Chicago Fed’s Goolsbee. 

• The two months of PPI reports meanwhile have highlighted the volatile and revision-prone nature of the trade services category.
• July’s report saw a far stronger than expected surge in headline and a crude measure of core PPI inflation on trade services, before the latter then whipped lower in August along with a downward revision to July.
• As always, our preferred measure of core PPI inflation is to strip out food, energy and trade services. Here, price pressures moderated in August to 0.33% M/M after a strong 0.56% M/M in July (only modestly revised lower from 0.61%), still a strong uptick with a cumulative 0.9% increase in just two months considering it averaged 0.15% M/M in 1H25 or 0.3% M/M through 2024.
• As such, whilst the August report will have relieved some concerns about tariff-related price pressures after an initially booming July, the two-month net takeaway has been a strong uptick in input cost inflation. 

• RES 4: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg 
• RES 3: 1.3925 High Aug 22 and the bull trigger
• RES 2: 1.3890 High Sep 11
• RES 1: 1.3810 20-day EMA 
• PRICE: 1.3749 @ 21:02 BST Sep 16
• SUP 1: 1.3727 Low Aug 29 and a bear trigger  
• SUP 2: 1.3709 61.8% retracement of the Jul 23 - Aug 22 bull cycle
• SUP 3: 1.3658 76.4% retracement of the Jul 23 - Aug 22 bull cycle 
• SUP 4: 1.3637 Low Jul 25  

A sharp sell-off in USDCAD this week has resulted in a break of the 20-and-50-day EMAs. This undermines a recent bullish theme and a continuation lower would expose key short-term support at 1.3727, the Aug 27 low. A break of this level would strengthen a bearish threat. For bulls, resistance levels to watch are; 1.3890, the Sep 11 high, and 1.3925, the Aug 22 high and bull trigger.