MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]

We have focused much of the MNI US CPI Preview (found here) on goods inflation but the heavily weighted services component will continue to be important. 

• Core services ex-housing inflation (“supercore”), analysts on balance expect an acceleration from the 0.22% M/M in February with an average estimate of 0.26% M/M (median 0.29).
• Note the wide range in the detailed summary table further below, from 0.03% to 0.36% M/M. Also note that this category has the largest deviations with its PCE equivalent owing to greater methodological differences in some pertinent series.
• As for housing inflation, no material change is expected this month, still expected to print towards the middle of a rounded 0.3% M/M having returned to averages seen prior to the pandemic.
• The weighted average of OER and primary rents has averaged 0.28% M/M through Nov-Feb for exactly in line with the 2019 average as an example, although could be marginally firmer than this in March. 

• Treasury futures still weaker after the bell but off session lows, little react to release of FOMC minutes that note risks to increased inflation and elevated policy uncertainty, stocks surged higher on the news, SPX eminis +9.6%, the Dow +7.88%, Nasdaq +12.5% after the rate close.
• Focus remains squarely on Pres Trump tweet upping China tariff to 125% while granting 90 day pause for 75 other countries while lowering to reciprocal tariff level to 10%.
• Most notable for Tsys is the swing in curves - from new 3 year highs overnight (2s10s tapped 73.847) to 44.835 at the moment (38.225 low). Projected rate hike pricing retreats: current levels vs. this morning (*) as follows: May'25 at -6bp (-13.4bp), Jun'25 at -22bp (-37.9bp), Jul'25 at -38.9bp (-61.4bp), Sep'25 -54.6bp (-79.3bp). Year end projection of 75bp total rate cut vs. full point this morning.
• While tariff headlines will continue to buffet markets, data in focus for Thursday includes weekly claims and March CPI: Analyst unrounded estimates see core CPI inflation little changed in March, at circa 0.25% M/M after 0.23% in February. It implies risk to the downside for rounded consensus of 0.3% M/M.

• RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
• RES 3: 1.4415 High Apr 1 
• RES 2: 1.4301 50-day EMA 
• RES 1: 1.4274 High Apr 9
• PRICE: 1.4158 @ 15:47 BST Apr 9
• SUP 1: 1.4028 Low Apr 3 and the bear trigger 
• SUP 2: 1.3986 Low Dec 2 ‘24  
• SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
• SUP 4: 1.3894 Low Nov 11 ‘24 

USDCAD has recovered from last week’s low. For now, the move higher appears corrective. The sell-off last week confirmed a resumption of the medium-term bear cycle that started Feb 3. Price has traded through a key support at 1.4151, the Feb 14 low, and this signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4301, the 50-day EMA.