US TSYS: Unwinding Early Tariff-Tied Headline Risk
- Early Friday headline risk on tariffs again - spurred a fast risk-off reaction in markets after Pres Trump's unexpected 25% tariff threat on Apple followed by 50% tariffs on EU this morning.
- Treasuries gapped higher, Jun'25 10Y tapped 110-17.5 high (10Y yld 4.4456% low) while SPX emins traded down to 5756.5 from 5858.75 prior to the headlines. Both spent much of the session gradually unwinding the moves -
- Mollified to a degree after after Tsy Sec Bessent claimed that the "US is far along in trade talks with India and other Asian countries...most countries are negotiating in good faith except the EU," adding that the deals are "moving quickly".
- Heavy volumes on the day (TYM5 over 3.7M) tied to Jun'25/Sep'25 roll, Sep takes lead quarterly next Friday.
- The prevailing theme of dollar weakness in recent months played out again this week, prompting the Bloomberg dollar index to fall ~1.65% this week and print fresh yearly lows in the process.
- Extended weekend with Monday's Memorial Day holiday. Tuesday Data Calendar: Durables, Cap Goods, Consumer Confidence, split times for Tsy bills and 2Y Note auctions next Tuesday.
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US TSY OPTIONS: BLOCK: Jun'25 10Y Call Spread
- 10,000 TYM5 111/113 call spds, 34 vs. 110-19.5/0.26%
FED: Beige Book: Price Pressures Tick Higher, Passthrough In Question
The April Beige Book summary of Inflation conditions: "Prices increased across Districts, with six characterizing price growth as modest and six characterizing it as moderate, similar to the previous report. Most Districts noted that firms expected elevated input cost growth resulting from tariffs."
- Prior edition (Feb): "Prices increased moderately in most Districts, but several Districts reported an uptick in the pace of increase relative to the previous reporting period. "
- The latest edition suggests "most" businesses will attempt to pass along tariff-related price increases to consumers, but the ability to do so may vary due to softer demand in some sectors - a potential contrast with the high-inflation pandemic reopening period where sellers were easily able to pass on price increases:
- "Many firms have already received notices from suppliers that costs would be increasing. Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy. Most businesses expected to pass through additional costs to customers. However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms."
EURJPY TECHS: Trading Above Support
- RES 4: 165.43 High Nov 8
- RES 3: 164.90 High Dec 30 ‘24 and a key medium-term resistance
- RES 2: 164.55 High Jan 7
- RES 1: 163.55/164.19 High Apr 14 / High Mar 18 and the bull trigger
- PRICE: 161.88 @ 16:19 GMT Apr 23
- SUP 1: 160.99/159.48 50-day EMA / Low Apr 9
- SUP 2: 158.30 Low Apr 7 and key support
- SUP 3: 157.02 76.4% retracement of the Feb 28 - Mar 18 bull cycle
- SUP 4: 155.60 Low Low Mar 4
EURJPY is in consolidation mode. The recent pullback appears corrective and trend conditions remain bullish. Key short-term support has been defined at 158.30, the low on Apr 7. A break of this level is required to signal scope for a deeper retracement. This would open 157.02, a Fibonacci retracement. For bulls, a resumption of gains would expose 164.19, the Mar 18 high and the bull trigger. Clearance of this hurdle would resume the uptrend.
