CZECHIA: CNB's Frait Says Labour Market Conditions Justify Cautious Approach
- CNB Deputy Governor Jan Frait told Seznab Zpravy that labour market tightness remains one of the key reasons why the Bank Board prefers to approach further rate cuts with caution. He admitted that there are signs of easing tension in the jobs market, but so far they have been just signs. He warned against wider fiscal deficits, both at home and abroad, noting that Czechia is 'not an isolated island' and rising deficits in core economies could increase borrowing costs in peripheral states. He also said that 'wars are a highly inflationary phenomenon' but the planned increase in defence spending will not lead to an immediate boost in output because of existing capacity constraints, hence is more of a long- or medium-term risk.
- Late last week lawmakers approved changes to the budget rules, allowing the government to increase defence spending through extra debt issuance. The measure runs counter to the government's earlier efforts to contain fiscal deficit amid the perception that current US foreign policy places a greater burden on European states to take care of their own security.
- A source story by Seznam Zpravy notes that ANO officials have realised that it is important not to create a strong impression that the party will certainly win the autumn parliamentary election in order to avoid voter demobilisation. The article suggests that ANO officials were pleased with the recent downtick in the party's support rates and see it as an opportunity to 'scare' voters with the prospect of the current governing coalition staying in power. Meanwhile, the latest STEM/CNN Prima News poll put ANO in first place with a support rate of 32.2%, with Prime Minister Petr Fiala's Spolu coalition trailing with 19.5%.
- Also on the election front, Hospodarske Noviny reported that ANO leader Andrej Babis has been communicating that the election will be decided in four regions, namely Prague, Central Bohemia, Moravia-Silesia and South Moravia. These regions cover around half of all parliamentary seats. Although Spolu is expected to win in the capital, ANO is targeting 40% of votes in Moravia-Silesia, while the situation in the other two regions is hard to predict.
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USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
