ECB: Strong EUR REER One Source Of Pressure For NEIG Inflation
Jul-02 14:21
Eurostat noted last year that more than half of all imports in 2022 were industrial products, and that the overall import dependency ratio of industrial product supply was around 15% (source).
- Eurozone non-energy industrial goods (NEIG) inflation has been below 0.7% Y/Y for the last 11 months, with sequential seasonally adjusted readings tracking within a tight -0.1 to 0.1% M/M range. Anecdotally, both the Spanish and German June manufacturing PMIs suggested the exchange rate had dragged on input prices.
- While the exchange rate may be adding pressure to NEIG inflation all else equal, other drivers are also at play: (1) A normalisation of the NEIG inflation process that had been distorted post-covid, (2) subdued Eurozone domestic demand (3) disinflationary forces from key import markets such as China. On the third point, Chinese consumer goods producer price inflation has been negative on a Y/Y basis since April 2023.
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US TSY FUTURES: FV Blocked
Jun-02 14:17
Latest block trade lodged at 10:04:49 NY/15:04:49 London:
- FVU5 6.4K lots blocked at 108-05.75, looks like a seller.
- DV01 ~$281K.
FOREX: Fresh Phase of USD Sales Put EUR, JPY Toward Key Breakout Levels
Jun-02 14:09
- EUR/USD pressuring intraday highs on the back of the ISM manufacturing print - the dip in the 10y yield helping aid the move lower in USD across the board, but only EUR/USD and USD/JPY are testing session highs/lows.
- Clearance of 1.1438 puts the pair at the highest since mid-April, narrowing the gap with the 1.1573 bull trigger. For USD/JPY, support has broken at typing, with the pair inside ~40 pips of 142.12 key support.
US TSYS: Stagflatonary ISM Narrative Limits Post-Data Reaction
Jun-02 14:09
A softer-than-expected headline ISM manufacturing survey provides a very light bid, although the underlying stagflationary narrative remains intact with a prices paid component remaining above 69.0 limiting the rally.
- TYU5 adds 0-05+ to 110-24+ following the data before fading back to 110-20+.
- The contract remains within the pre-existing session range (110-18/30).
- Initial support and resistance located at 109-26 & 110-30, respectively. Recent gains still appear corrective at this stage.
- Yields 2.0-3.5bp higher on the day, light bear steepening theme on the curve.
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