USDCAD TECHS: Trend Needle Points South

Flash PMIs (Wed) and preliminary durable goods (Thu) headline the week’s data but we think there should also be special mention for the Fed’s Beige Book also tomorrow. Fed officials have been noting a focus on inflation should there be a trade-off with the dual mandate, and we'll be watching the extent to which costs are increasing and ability to pass these increases on. 

• These liaison-based reports offer a timely update on a broad range of economic conditions. Powell had this to say at the Mar 19 FOMC press conference: “We have an extraordinary network of contacts that come in through the reserve banks, and put in the Beige Book, and also through contacts at the board. And we get all that, and we do understand that sentiment has fallen off pretty sharply but economic activity has not yet. And so we're watching carefully.”
• The last publication from early March reported an acceleration in inflation as most Districts shifted from modest to moderate price increases.
• There was broad-based difficulty in passing input costs on to customers [something shown in today’s Philly Fed non-manufacturing index with its strongest input cost inflation since Feb 2023 but zero selling price inflation] but nevertheless most Districts reported expectations that tariffs would see a need to raise prices and there were isolated reports of pre-emptive price increases.
• On the other side of the dual mandate, a smaller share of Districts reported increases in headcount six weeks ago whilst there was the first recent reporting of one District seeing a decrease in headcount, albeit only slight.

Fox's @CGasparino on X.com has an account of Tsy Sec Bessent's comments on a China trade deal that sound closer to the Reuters version of events ("a slog" to get a deal) moreso than Bloomberg's (which reported that he expected the situation to de-escalate): 

• "BREAKING: Ive been told by a person close to @SecScottBessent  the reports on his remarks about a trade deal with China have being imminent overstate what he said. He meant that there is room for talks and de-escalation but much also depends on China's willingness to compromise on trade as well."
• Gasparino follows this up by reporting that "Bessent & Co scrambling to reach deals with India, South Korea, Japan, Australia; deals said not to be imminent". Recall that Gasparino reported Monday that "Japanese negotiators are complaining that the problem with the trade negotiations with the White House, what's delaying concrete progress and a real deal, is that US keeps changing its ask in terms of exactly what it wants, said one financial CEO who speaks regularly to country officials."
• In short, while the White House's official stance is that "We're doing very well with respect to a potential trade deal with China" and "18 proposals"  from various trading partners being reviewed (per WH Press Secretary Leavitt today), there is little evidence of any concrete progress on major trade deals.
• An additional item on the agenda worth noting for any insight on this and other fronts: Bessent says on X.com that he will be sharing his "thoughts on the state of the global financial system" at an IIF event at 10ET Wednesday.

• Treasuries look to finish mixed Tuesday, curves unwinding a large portion of Monday's steepening with bonds outperforming weaker short end rates (2s10s -6.174 at 58.027) as markets re-assess tariff-tied risks to global trader and the Trump Admin's efforts to meddle with the Federal Reserve's independent policy making.
• Europe returned from extended Easter holiday improved market depth more than trade volumes evidently (TYM5 at 1.2M near steady to Monday's levels) while the week openers risk-off tone was gradually unwound.
• Brief midday risk-on move extended after headlines that Tsy Sec Bessent (speaking at a JP Morgan event in DC - closed to public and media) sees the China tariff standoff as unsustainable and expects a de-escalation to occur. Bloom quickly came off the rose as sources clarified the gist of negotiations would be a "slog".
• Limited react to data: The Philly Fed non-mfg activity index fell further in April to -42.7 from -32.5 in Mar, -13.1 in Feb and -9.1 in Jan; Johnson Redbook Same-Store Retail month-to-date Y/Y sales up 7.0% (the week ending April 19 was +7.4% Y/Y). Same with Fed speakers, taking a back seat to headline risk.
• Cross asset: Gold retreats to 5372.0 currently after topping 5500.0 briefly overnight; Greenback rebounding BBG US$ index +5.01 at 1221.15; SPX eminis +110 at 5294.75.