TARIFFS: Trump Maintains Escalated Rhetoric On EU 50% Tariff On June 1

The April Beige Book summary of Employment conditions: "Employment was little changed to up slightly in most Districts, with one District reporting a modest increase, four reporting a slight increase, four reporting no change, and three reporting a slight decline. This is a slight deterioration from the previous report with a few more Districts reporting declines."

• Prior edition (Feb): "Employment nudged slightly higher on balance, with four Districts reporting a slight increase, seven reporting no change, and one reporting a slight decline."
• Note that wage growth slowed overall for yet another report (February's also noted a slowdown in multiple districts), with some signs of loosening in the labor market - though uncertainty over immigration policy appears to be an increasing issue for labor supply:
• "Hiring was generally slower for consumer-facing firms than for business-to-business firms. The most notable declines in headcount were in government roles or roles at organizations receiving government funding. Several Districts reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions. In addition, there were scattered reports of firms preparing for layoffs. Most Districts and markets reported an improvement in overall labor availability, although there were some reports of constraints on labor supply resulting from shifting immigration policies in certain sectors and regions. Wages generally grew at a modest pace, as wage growth slowed from the previous report in multiple Districts."

• RES 4: 149.28 High Apr 3    
• RES 3: 147.77 50-day EMA 
• RES 2: 144.90 20-day EMA
• RES 1: 143.22 High Apr 23
• PRICE: 142.65 @ 16:08 BST Apr 23
• SUP 1: 139.79 1.382 proj of the Feb 12 - Mar 11 - 28 price swing
• SUP 2: 138.82 1.500 proj of the Feb 12 - Mar 11 - 28 price swing
• SUP 3: 138.07  LowJul 28 ‘23
• SUP 4: 137.85 1.618 proj of the Feb 12 - Mar 11 - 28 price swing

The trend condition in USDJPY remains bearish and the bounce from Tuesday’s low is considered corrective. Recent fresh cycle lows confirm a resumption of the downtrend and maintain the price sequence of lower lows and lower highs. Note too that MA studies are in a bear-mode position highlighting a dominant downtrend. Sights are on 139.79 next, a Fibonacci projection. Initial firm resistance to watch is the 20-day EMA, at 144.90.

April's Beige Book portrayed an economy in which economic activity was relatively little changed from the previous edition in February, but with increasing uncertainty over government policy causing businesses' outlooks to deteriorate. Likewise, inflation pressures were seen as little changed (still "modest" / "moderate" for the most part) vs prior, but the outlook is for increasing upside to input prices albeit with questionable ability to pass them through to buyers.

Economic Activity: "Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports. Just five Districts saw slight growth, three Districts noted activity was relatively unchanged, and the remaining four Districts reported slight to modest declines...The outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose."

• Prior edition (Feb): "Overall economic activity rose slightly since mid-January. Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions."

On a district-by-district Fed basis, the Beige Book anecdotes suggest that even for those regions posting growth, businesses' outlooks had deteriorated significantly. Below are the 12 regional Feds sorted by categories of economic activity, plus any notable commentary:

• Increased slightly (5 districts): Atlanta, Boston ("the outlook became more pessimistic on tariff-related concerns"), Richmond ("grew slightly...despite some pockets of weakness tied to federal staffing and contract spending"), Kansas City ("but expectations about business activity and consumer spending weakened considerably"), Dallas ("slowed to a slight pace...Outlooks deteriorated as heightened uncertainty surrounding domestic and trade policy hindered firms' ability to plan").
• Contracted modestly/"lower" (4): New York ("heightened uncertainty weighed on businesses and consumers"), Philadelphia ("sentiment fell, and firms grew less optimistic about future growth amid rising economic uncertainty"), Minneapolis, San Francisco ("slowed slightly...the economic outlook worsened materially").
• Flat/unchanged/little changed (3): Chicago, Cleveland ("contacts expected activity to remain flat in the months ahead"), St Louis ("the outlook has slightly deteriorated. ...Contacts expressed a lot of uncertainty and an elevated effort in estimating the impact of tariffs and ways to reduce cost increases and supply disruptions")