GLOBAL MACRO: Shipping Rates Trending Lower Over 2025 As Trade Worries Grow
Shipping rates have been trending lower since mid-2024 as threats to Red Sea shipping dissipated and much of the related jump has now been unwound. They have taken another leg down since January this year though, as threats to global trade volumes from US tariffs weigh on prices charged. Since US reciprocal trade duties were announced on April 2, various shipping rate indices are mixed though.
- The Baltic Dry Index (BDI) is down 11.4% since April 2 and the average is -11.6% m/m & -21.9% y/y in April.
- February global IP rose 0.7% m/m, the 10th non-negative reading in the last year, to be up 2.9% y/y, the fastest since October 2022. Global trade growth has been trending up for the last year and was 3.0% y/y in February. However, both could slow going forward given that the BDI has been trending lower over the last year and can be a leading indicator.
Global trade vs Baltic Freight Index
- The FBX container rate is down 6.5% m/m & 15.9% y/y in April but actually up 0.7% since April 2 driven by an 8.3% increase in the China/East Asia to Mediterranean route, but this reflects some normalisation after the sharp drop on April 1 and it is still down almost 20% m/m on average in April to be 33.1% lower on a year ago.
- Given the tit-for-tat tariff increases between the US and China, it is not surprising that FBX container rate for China/East Asia to the east coast of North America is now 6.2% lower compared to April 2. The April average is little changed on the month but down 18.8% y/y.
- With shipping rates down double digits compared to a year ago and levels subdued, they are likely to provide some disinflationary pressure but container rates are still higher than end-2023 with the FBX up 52.1%, while BDI is now 33% lower.
Global FBX container rates US$/points
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USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
