EU CREDIT UPDATE: Nordea €500m WNG 10NC5 Tier 2 Green - Books

• In FX, EURUSD is trading closer to its recent lows. A short-term corrective bear cycle remains intact. Last week’s sell-off resulted in a breach of the 50-day EMA and support at 1.1646, the Sep 25 low, exposing 1.1516, 76.4% retracement of the Aug 1 - Sep 17 bull leg. Note that MA studies are in a bull-mode position. This continues to highlight a dominant medium-term uptrend. Initial firm resistance is 1.1779, the Oct 1 high. A break of this level would signal a bull reversal.
• A short-term bear condition in GBPUSD remains intact and last week’s extension down has strengthened this condition. The pair has breached a key short-term support at 1.3333, the Sep 3 low. The break signals scope for a deeper retracement. A clear break of 1.3280 (pierced), 76.4% of the Aug 1 - Sep 17 bull leg, would open key support at 1.3142, the Aug 1 low. Initial resistance to watch is 1.3443, the 20-day EMA.
• The underlying bullish trend condition in USDJPY remains intact and Friday’s pullback is for now, considered corrective. Note that the trend is overbought and a deeper retracement would allow this overbought set-up to unwind. The next important support lies at 149.45, the 20-day EMA. On the upside, a break of Friday’s 153.27 high, would resume the uptrend and open 154.39, the 76.4% retracement of the Jan 10 - Apr 22 bear leg.

SX5E (11th Nov) 5200/5000ps, bought for 14.4 in 6k.

• Goldman Sachs write that the customs duties implied US effective tariff rate “had risen by 9pp through August, or by nearly 11pp net of frontloading effects.”
• “Following recent tariff increases on some products and countries and hints of exemptions for others, we now expect it to rise by 12pp in total in 2025 and by another 3.5pp or 15.5pp in total through 2026, a bit less than we previously assumed.”
• They estimate that foreign exporters are “absorbing some of the tariff cost, unlike in 2019, though some of the decline likely reflects underreporting of import value to evade tariffs”. Meanwhile, passthrough to consumer prices has reached “55% after six months, meaningfully lower than at the same point in 2019.”
• They estimate that “US consumers would eventually absorb 55% of tariff costs, US businesses would absorb 22%, foreign exporters would absorb 18%, and 5% would be evaded.” US businesses are likely bearing a larger share currently though.
• GS estimate that “tariff effects have raised core PCE prices by 0.44% so far this year”. Their forecast, which assumed peak passthrough will rise from 55% to 70% “implies a further 0.6% boost from tariffs through next year”. That leaves core PCE inflation at 3.0% Y/Y in Dec 2025 and 2.4% in Dec 2026.
• To give an idea of sensitivity, core PCE inflation would be 3.1% and 2.7% respectively if passthrough peaks at 100%, or 2.9% and 2.2% if passthrough holds at 55%.