CANADA: BoC Presser Highlights: BoC Downplayed CPI Trim Strength
Q: There were some economists talking about a hold this month. What discussions and considerations went into this area?
Macklem: We said we would be considering further rate cuts and would be taking a gradual approach (it was more gradual as we cut 25bp instead of 50bp).
Rogers: On the core measures of inflation, we use them to gauge underlying inflation and the direction it’s going. There’s a whole basket of measures that we look at that are useful at different times. Core measures are a little bit above headline inflation. There are some particularities, particularly trim and how it’s calculated that led us to not put a lot of weight on what it suggests for underlying inflation at this point in time. The chart that is most useful for us on inflation pressures is the heat map (chart 9 in MPR).
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US DATA: Stronger Dallas Fed Manufacturing Only Partly Offsets Wider Weakness
December's Dallas Fed Manufacturing Survey beat expectations with a headline reading of positive 3.4 vs -3.0 expected and -2.7 prior. That's the first positive reading in 32 months and the highest in 33, highlighted by a much stronger new orders reading (up 11 points to -0.9, pointing to unchanged demand from the prior month but still the best reading in 31 months).
- Other readings were mostly stronger vs November, including production, capacity utilization, shipments, expectations, though the employment subindices were a little softer.
- Notably though, there were much lower inflationary pressures evident in the survey, with raw materials prices falling 18 points to a 17-month low 10.5, with finished goods falling 12 points to -3.4, the first negative reading this year.
- Dallas is the 5th regional Fed to publish its December manufacturing report, and overall they were very mixed: Empire fell to 0.2 from 31.2 and Philly to -16.4 from -5.5, with Kansas City to -4 from -2, more than offsetting the improvements in Richmond (-10 from -14) and Dallas.
- That's not to mention the December MNI Chicago PMI which fell to 36.9 vs 40.2 prior, and the preliminary S&P Global PMI dipping to 48.3 from 49.7.
- As such despite an apparent improvement in some regional survey optimism immediately following the November elections (and again, this was quite mixed - the range of survey scores was the broadest since April 2020), the overall theme of the manufacturing sector remaining steady at a weak level generally remains intact.
US 10YR FUTURE TECHS: (H5) Trend Needle Points South
- RES 4: 112-02 Low Oct 14
- RES 3: 111-20+ High 6 and the bull trigger
- RES 2: 110-28 50-day EMA
- RES 1: 110-03+ 20-day EMA
- PRICE: 108-29 @ 16:16 GMT Dec 30
- SUP 1: 108-12 Low Dec 30
- SUP 2: 108-00 1.500 proj of the Oct 1 - 14 - 16 price swing
- SUP 3: 107-27+ 1.0% 10-dma envelope
- SUP 4: 107-19+ 1.618 proj of the Oct 1 - 14 - 16 price swing
The trend condition in Treasury futures remains bearish despite the intraday rally into the Monday close. These short-term gains are considered corrective below the 110-03+ 20-day EMA. Last week’s sell-off reinforces the current bear cycle. The contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108+12+, a Fibonacci projection.
FED: US TSY 26W AUCTION: NON-COMP BIDS $1.723 BLN FROM $72.000 BLN TOTAL
- US TSY 26W AUCTION: NON-COMP BIDS $1.723 BLN FROM $72.000 BLN TOTAL
