GERMAN DATA: Wage Growth Moderating As Major Contract Negotiations Loom
German wage growth has moderated recently, in terms of both overall and negotiated wages. This broadly matches ECB expectations, with continued moderation key to capping broader inflation pressures.
- Nominal overall wage growth declined to +2.7% Y/Y in June (latest data available) - a significant slowdown vs +6.9% May. This translated to a slowdown in real wage growth to +0.5% Y/Y (vs +4.4% May), the lowest rate since December 2023. This provides some downside risk for the overall Q2 print, which is yet to be released.
- The slowdown in wage growth has been broad-based, with growth for the lowest income quintile remaining the strongest but declining to +5.8% Y/Y in June from +8.4% in May. Wage growth for the highest quintile moderated to +3.4% Y/Y in June (vs +7.3% May).
- Growth in negotiated wages remains elevated but below recent highs. For July, excl. one-offs, negotiated wages rose 4.3% Y/Y (vs +4.2% June, +5.0% May). In services, growth remained stronger than in industry (+4.5% Y/Y and +3.6% Y/Y respectively, both unch from June). The next major round of central negotiations in Germany is expected around September, when contracts in the metal and electrical industry will expire. That could provide some volatility for the growth rate again.
- For reference, about 49% of contracts were based on centrally negotiated wages in 2023, according to Destatis.
MNI, Destatis
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USDCAD TECHS: Bear Threat Still Present Despite Recent Gains
- RES 4: 1.3899 High Nov 1 and a key resistance
- RES 3: 1.3846/55 High Apr 16 and the bull trigger / High Nov 10 2023
- RES 2: 1.3755/3792 High Jul 2 / High Jun 11
- RES 1: 1.3748 High Jul 19
- PRICE: 1.3716 @ 15:54 BST Jul 19
- SUP 1: 1.3590/89 Low May 16 and a key support / Intraday low
- SUP 2: 1.3547 Low Apr 9
- SUP 3: 1.3512 50.0% retracement of the Dec 27 - Apr 16 bull cycle
- SUP 4: 1.3478 Low Apr 4
USDCAD has recovered from its recent low. However, a short-term bear threat remains present, for now. Recent weakness resulted in a test of 1.3590, the May 16 low and a key support. A clear breach of it would highlight an important technical break and pave the way for an extension lower near-term. Initial firm resistance to watch is 1.3755, the Jul 2 high. Clearance of this level would alter the picture and highlight a bullish development.
AUDUSD TECHS: Support Remains Intact
- RES 4: 0.6895 High Jul 13 / 14 2023
- RES 3: 0.6871 High Dec 28 and a key resistance
- RES 2: 0.6839 High Jan 02
- RES 1: 0.6799 High Jul 11
- PRICE: 0.6693 @ 15:50 BST Jul 19
- SUP 1: 0.6684 Low Jul 19
- SUP 2: 0.6666 50-day EMA
- SUP 3: 0.6576 Low Jun 10 and a key support
- SUP 4: 0.6558 Low May 8
AUDUSD bullish conditions remain intact and the latest pullback appears to be a correction. Initial firm support has broken at 0.6712, the 20-day EMA. A close below here could signal scope for a deeper retracement, towards 0.6666, the 50-day EMA. The bull trigger is at 0.6799, the Jul 11 high. A break would resume the uptrend and pave the way for a climb towards 0.6839 next, the Jan 2 high. Moving average studies are in a bull-mode set-up highlighting a rising trend.
US TSYS: Back Near Lows of Week as Fed Enters Policy Blackout
- Treasury futures remain weaker after the bell, near lows for the week. No data or obvious headline driver for the break lower, while NY Fed Williams monetary policy panel discussion didn't break any new ground ahead tonight's policy blackout that runs through August 1.
- Williams said the central bank remains committed to its 2% inflation target, adding that the longer run trends affecting a low neutral rate in the U.S. are still in place.
- Tsy Sep'24 10Y futures currently -13 at 110-26 vs. 110-25 low. Initial technical support at 110-15+ (20-day EMA) followed by 110-03 (50-day EMA) values.
- While market depth may be thin, net volumes were strong for summer markets: TYU4 over 1.4M after the bell. Volumes surged on the back of news that cloud software provider CrowdStrike was having outages that affect Microsoft systems around the globe overnight. Headlines of workaround solutions having been filtering through the last couple hours.
- Speculation over whether President Biden will pull out of his run for a second term continue. Opinions vary over how FI markets will react if Biden pulls out, from no reaction at all to a surge in yields depending on who fills the void. Debate over price action and curve moves were ongoing as markets game out rate cuts, taxes, tariffs, mass deportations, etc.
