GBPUSD TECHS: Bull Cycle Remains In Play

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The headline business activity index in the NY Fed's Business Leaders Survey of regional service firms fell to -19.3 in March, from -10.5 prior (there was no consensus estimate). This was the 4th consecutive deterioration in the index to the lowest since January 2023. 

• Even more concerning, the business climate index fell 16.1 points to -51.7, the lowest since early 2021, with capex softening.
• There was no relief on the inflationary front: prices paid rose 7.5 points to 58.8 with prices received up 1.3 to 28.7: both post-2023 highs.
• Forward-looking indicators also deteriorated: 6-month business activity fell 24.9 points to -3.3, lowest since late 2022, with future business climate down 23.3 points. And this was reflected in post-2020 lows for expected number of employees (down 6.9 points to 3.8), wages (down 5.7 points to 26.9), and capex (-5.5 points to -3.9).
• The survey didn't identify any particular trigger for the sharp shift in the last two months, but it seems very likely to be related to the ongoing changes in federal government policy including on tariffs - the initial rounds of which have impacted trade with NY-neighboring Canada - and general uncertainty. (The survey was conducted between March 3 and 11).
• While we await regional Fed services surveys for March from Dallas, Philadelphia and Kansas City, the NY services pullback is also consistent with a retreat in the national ISM services index in March - see chart.

• Treasury futures gaining (TYM5 110-25.5 +6) after the $13B 20Y Bond auction reopen (912810UJ5) trades through: drawing 4.632% high yield vs. 4.646% WI; 2.78x bid-to-cover vs. 2.43x prior.
• Peripheral stats: indirect take-up rises to 68.84% vs. 63.0% prior; direct bidder take-up 22.35% from 19.5% prior; primary dealer take-up retreats to 8.81% vs. 17.5% prior.
• The next 10Y auction (re-open) is tentatively scheduled for April 16.