US DATA: Texas Manufacturers Turn Even More Pessimistic In April On Tariffs
The Dallas Fed's Texas Manufacturing Survey for April was the weakest since the start of the Covid pandemic in 2020, as tariff uncertainty weighed heavily on manufacturers in the district while price pressures remained elevated.
- The headline general activity index printed -35.8 (vs -17.0 survey, and lowest since May 2020), was a 19.5 point drop from March and a 50 point drop since January.
- That being said, actual factory activity continued to rise, with the production index at 5.1, indicating "modest growth", though shipments went negative for the first time this year.
- Most of the damage was in "perceptions of broader business conditions", which "continued to worsen notably in April", per the report. New orders collapsed 19.9 points to -20, a 28-month low. And expectations also deteriorated: the index of production 6 months ahead dropped 12.8 points to 14.8, a 16-month low.
- Summarizing the headline activity findings in the report: "The company outlook index also retreated to a postpandemic low...outlook uncertainty index pushed up...Labor market measures suggested a slight decrease in head counts and shorter workweeks this month...Most other indexes of future manufacturing activity remained positive but slipped further below average."
- Anecdotes by manufacturers unsurprisingly cited tariff uncertainty, but also noted federal government spending cuts and restrictive monetary policy as factors (link to commentary here).
- And price pressures remained acute: prices paid rose over 10 points to 48.4, highest since June 2022, with prices received up 8.6 points to 14.9 - just a 10-month high and suggestive of a continued contraction in margins. Forward-looking indicators were a little more benign, with 6-month expected prices paid ticking back 5.6 points to 47.6 (albeit from 3+ year highs in Feb/Mar), and though expected prices received ticked up 2 points to 29.6, this was well below the 34-month high 42.0 in February.
- A set of special questions in the report showed that while 48% of respondents showed "no change" in firms' ability to pass price increases onto customers, 40+% found it "somewhat/much harder" to do so (just 13.5% somewhat/much easier).
- 74.3% said they expected tariffs to impact their business negatively this year (when "don't know" respondents were excluded; 59% when they were included). A majority of the "negative" respondents said they were planning on passing cost increases onto customers (and the vast majority of them planned to increase prices within 3 months), 44% said they would absorb cost increases internally, while 29% would find new domestic suppliers and just 5.5% sought to relocate production to the US.
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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.
