QUICK QUILL — It’s a shame Trump had to publicly humiliate Powell, who likely would have acquiesced to the messages in the hard and soft data come Wednesday. Alas, we can only add to the data pyre regional Fed surveys that hammer home a quick reversion to the industrial recession after a tariff-terror-induced short-lived reprieve. The service economy is faring no better, with Jackson Hole host Kansas City Fed’s latest demonstrating margin squeezes exacting damage via rising job losses. And then there is the added specter of contracting global trade. This weekend, the World Trade Organization predicted global trade would decline by 0.2% for the full year 2025 and warned of downside risks to that base case. That will further challenge the Fed as the U.S. has never avoided recession under such circumstances. We reiterate our constructive stance on the euro, which remains vulnerable on technical and fundamental grounds.
TAKEAWAYS
- Relative to the dollar, the Euro has appreciated nearly 15% in the first half of the year to its current 1.17, the highest in several years; however, IFO Business Expectations have not kept pace and only risen slightly to their current 90.7, flagging an overshoot in the Euro’s value
- Core Capex Orders fell -0.7% MoM in June to $75.6 billion vs. the +0.2% consensus, a red flag for future business equipment investment; regional Fed survey Capex Expectations concur, with the ISM-adjusted average falling to 49.0 in June vs. January’s 50.3 print
- In the Kansas City Fed’s July Services data, Current and Future Selling Prices ticked up while Current Revenues and Employment sank into net negative territory; more than 50% of firms surveyed saw profit margins fall last quarter and expect the same in the next 12 months