US-RUSSIA: Odds Of US Sanctions On Russia Spike Following Trump Comments
The implied probability of President Donald Trump increasing sanctions on Russia by September 15 spiked from 23% to 50%, following hawkish comments from Trump ahead of a meeting with UK PM Keir Starmer.
- Trump said: “I’m disappointed in [Russian] President Putin... So we’re going to have to look and I’m going to reduce that 50 days that I gave him to a lesser number,” referrring to an ultimatum issued to Putin earlier this month to work credibly toward a ceasefire or new sanctions will be imposed. Trump added he "already knows the answer", signalling scepticism Russia will come to the negotiating table.
- Should Trump greenlight the package, a punitive Russia sanctions package which has been modified to ensure Trump has final say, is expected to pass US Congress without issue. Without Trump's endorsement, there is little chance lawmakers will work independently to pass the package.
- Former Australian general Mick Ryan notes in useful article that Putin is unlikely to alter his Ukraine strategy without a major shift in US policy. Ryan notes that Putin's strategy has two key elements: Wait out Ukraine’s key supporters and "slowly strangle Ukraine by attriting its military, degrade its economy and destroy civilian morale."
- New US sanctions may depend on the outcome of today's US-China trade talks, expected to touch on China's purchase of Russian hydrocarbons, as the Senate package leverages secondary tariffs on buyers of Russian O&G to choke Russia's economy.
Figure 1: Will Trump increase sanctions on Russia by September 15? (24-hour chart)
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.
