US NATGAS: Northeast EOD – Bearish Revisions

• Tomorrow’s advance trade report for February will likely be looked at more closely than usual, although there will only be so many conclusions that can be drawn ahead of the full release on Apr 3.
• January saw a surge in monetary gold imports in January in what was seen primarily as an arbitrage play, with these non-productive assets captured in import data but not in GDP data.
• We’ll get a hint of whether this has been repeated by whether there’s another strong increase in imports of “industrial supplies” after they jumped 34% M/M in Jan after 19% in Dec.
• The subsequent full release showed this was driven by “finished metal shapes” rising 149% M/M after 202% M/M, leaving imports at 10x their typical monthly level. Details hidden within the report suggested this was driven by precious metal bars.
• Comex gold inventory data suggest a further strong increase in monetary gold imports in February could be on the cards. Gold inventories increased a further 25% through February (and are since 7% higher this month in data up to Mar 21) after the 47% surge in January and 19% in December.
• Silver inventories have also seen strong increases, and at a faster rate than in January (15% in Feb vs 12.5% in Jan) which could further add to this effect but very much secondary to the gold swings.
• Indeed, Bloomberg consensus currently eyes a goods trade deficit of $138bn in Feb, narrowing from $156bn in Jan but still above the $122bn in Dec and $104bn in Nov.
• This should see a further widening in the goods trade deficit in trend terms, with the $127bn three-month average to January equivalent to ~5.1% GDP vs 4.1% GDP in the three months prior to October.
• As for what else to watch in the advance release, we will keep an eye on consumer and capital goods which also saw a sizeable increase in January in potential tariff front-running. Business surveys this could have continued in February with indicators subsequently softer in March. 

St Louis Fed President Musalem (2025 FOMC voter, hawk) reiterates his scenario-based outlook for monetary policy amid tariff/immigration uncertainty in a speech Wednesday, a viewpoint he also expressed in February. Overall he sees increasing risks of inflation stalling above 2%, with both initial and second-round tariff impacts key to the outlook, specifically mentioning risks of having to hold rates for longer or raise them, and advocates for the Fed maintaining what he calls a "patient approach".

• "If the economy remains strong and inflation remains above our target, then I believe the current, modestly restrictive policy will remain appropriate until there is confidence inflation is converging to 2%. If the labor market remains resilient and the second-round effects from tariffs become evident, or if medium- to longer-term inflation expectations begin to increase actual inflation or its persistence, then modestly restrictive policy will be appropriate for longer or a more restrictive policy may need to be considered. If labor market conditions were to deteriorate, with inflation stable or declining toward target and inflation expectations anchored at a level consistent with 2% inflation, policy could be eased further. At this juncture, a patient approach, involving careful assessment of incoming information, the outlook and risks, will help us as we seek maximum employment, price stability and a durable economic expansion."
• He notes "The risks that inflation will stall above 2% or move higher in the near term appear to have increased" and "it is possible and actually probable that inflation will be higher than we had expected. 3 to 6 months ago" even as growth looks weaker. His overall stance appears to be that while balancing the employment/inflation mandates is required, he sees keeping inflation expectations contained as the priority. "A scenario involving labor market softening and above-target or rising inflation would present a challenging environment for monetary policy. This scenario could occur for a variety of reasons, though higher tariffs and reduced immigration have been widely discussed and thought by many as likely to raise prices and soften aggregate demand and employment, at least in the near term. Higher tariffs potentially involve both direct and indirect effects on economic activity, the labor market and inflation, depending on how tariffs are implemented and any retaliation by trading partners."
• In Q&A he says: "that presents some challenges for monetary policy, because you have both sides of the mandate working in opposite directions...so what I think we ought to do in those situations is adopt a balanced approach, which is setting the interest rate with a few things in mind. And one of those things is understanding how far off you are from your employment side of the target or the growth side of the target, and how far off you are relative to the inflation side of the target, and balance that...that balanced approach works well when inflation expectations are stable and anchored and consistent with 2% inflation. If inflation expectations are threatening to become unanchored or becoming an anchor in the long term, then the balanced approach may not work. And at that point, it is my view that we would have to probably lean into the inflation side of our dual mandate to make sure inflation expectations and inflation remain anchored. Ultimately, we can't generate at full employment or maximum employment if inflation and inflation expectations are not anchored. So that's the ultimate objective."

• RES 4: 1.3175 High Oct 4 2024  
• RES 3: 1.3119 76.4% retracement of the Sep 26 ‘24 - Jan 13 bear leg
• RES 2: 1.3048 High Nov 6 ‘24
• RES 1: 1.3015 High Mar 20 and the bull trigger  
• PRICE: 1.2897 @ 16:45 GMT Mar 26 
• SUP 1: 1.2875 Low Mar 26     
• SUP 2: 1.2869 20-day EMA
• SUP 3: 1.2731 50-day EMA and a short-term pivot support  
• SUP 4: 1.2556 Low Feb 28      

The trend structure in GBPUSD remains bullish and the latest shallow pullback appears corrective. Moving average studies are in a bull-mode position and this highlights a dominant uptrend. A resumption of gains would pave the way for a climb towards 1.3048, the Nov 6 2024 high. Initial firm support to watch is 1.2869, the 20-day EMA. Clearance of this level would signal scope for a deeper retracement towards the 50-day EMA, at 1.2731.