EM LATAM CREDIT: Sovereign Support for Pemex

• When it comes to core goods more broadly, we’re mindful here of the rapid increase in reported manufactured input costs per various business surveys.
• The ISM manufacturing survey for March followed cues from the regional Fed surveys with its 69.4 prices paid reading at its highest since Jun 2022 (and +14.5pts since President Trump’s inauguration in January).
• Separately, the MNI Chicago PMI prices paid component only retreated 0.4pts in March having in February seen its sharpest monthly increase since July 1957 for its highest level since August 2022.
• Fed Governor Kugler, when speaking on Mar 25, called an apparent end of goods price disinflation as an "unhelpful" development as this category that "has often kept a lid on total inflation and also affects inflation expectations... I am paying close attention to the acceleration of price increases and higher inflation expectations, especially given the recent bout of inflation in the past two years".
• It followed Fed Chair Powell at the Mar 19 FOMC press conference, who whilst sounding fairly optimistic on the inflation outlook, interestingly specifically noted that recent inflation readings now showed more goods-driven inflation ("we have had two very strong goods inflation readings in the last two months which is very unexpected", noting that tariffs likely played a factor). 

• Analysts perhaps surprisingly look for a moderation in core goods inflation to circa 0.1% M/M after February saw a modest upside surprise with 0.22% M/M (0.16% expected) following 0.28% in Jan (strongest since May 2023).
• February’s strength was helped by used cars prices rising 0.9% M/M - a category expected to fall moderately in March - whilst core goods ex used cars increased 0.12% M/M.
• Core goods ex used cars prices increased a rounded 0.1% M/M in three of the six months up to February, already a reasonable ‘acceleration’ from the near flat readings averaged in both 2024 (with 7 of 12 months seeing declines on an unrounded basis) and pre-pandemic.
• Around 20% of US apparel imports are from China, with analysts expecting a moderation to 0.3% M/M after 0.6% M/M. It’s a noisy category and so should be taken with caution but we’ll nevertheless watch it closely. 

• RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
• RES 3: 1.4415 High Apr 1 
• RES 2: 1.4302 50-day EMA 
• RES 1: 1.4248 High Apr 8
• PRICE: 1.4212 @ 16:33 BST Apr 8
• SUP 1: 1.4028 Low Apr 3 and the bear trigger 
• SUP 2: 1.3986 Low Dec 2 ‘24  
• SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
• SUP 4: 1.3894 Low Nov 11 ‘24 

USDCAD has recovered from last week’s low. For now, the move higher appears corrective. The sell-off last week confirmed a resumption of the medium-term bear cycle that started Feb 3. Price has traded through a key support at 1.4151, the Feb 14 low, and this signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4302, the 50-day EMA.