STIR: 11bp Of Cuts Seen For Sept With Payrolls, ISM Mfg and Fedspeak Tomorrow
Jul-31 17:17
- Fed Funds implied rates hold their small extension seen early in today’s session that built on the hawkish shift with Fed Chair Powell’s press conference yesterday.
- Cumulative cuts from 4.33% effective: 11bp Sep (vs 15.5bp pre FOMC), 19.5bp Oct, 35bp Dec (vs 44bp), 44bp Jan and 56bp Mar (vs 65bp).
- The curve has flattened further, with the SOFR implied terminal yield of 3.20% (SFRH7, -3bp on the day) is firmly within the 3.1-3.3% range seen through July as it prices more than four cuts ahead from current levels.
- Today’s important round of US data at 0830ET hasn’t materially moved pricing despite net strength. Real personal spending was as expected, yesterday’s upside surprise in core PCE inflation in Q2 was found to come earlier in the quarter (although both headline and core PCE still printed above Fed tracking), jobless claims were again better than expected (initial claims back at the 2019 average when the u/e rate was 0.4/0.5pps lower than currently) and the Q2 ECI was stronger than expected.
- Tomorrow sees nonfarm payrolls for July where we see two-sided risks but with greater sensitivity to a dovish report after the hawkish shift on a patient Powell. Today’s price action appears to reinforce that.
- MNI Payrolls Preview: https://media.marketnews.com/USNFP_Aug2025_Preview_3bfda52c8f.pdf
- Tomorrow sees Cleveland Fed’s Hammack as the first scheduled speaker with the blackout lifted, set to appear on Bloomberg TV at 0910ET. We also expect dissent statements from Bowman and Waller – there is no set time here although for reference Waller’s March statement was released at 1000ET and Bowman’s September statement at 1300ET.
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POLITICAL RISK: Trump Threatens Arrest Of "Communist" Mamdani
Jul-01 17:06
When asked in Q&A at a visit of the "Alligator Alcatraz" detention facility, President Trump offered the possibility of arresting Mamdani, the winner of the New York City Democratic mayoral primary.
- Q: Zohran Mamdani in his nomination speech said he will defy ICE and will not allow ICE to arrest criminal aliens in NYC. What's your message to communist Zohran Mamdani?
- Trump: Well then we'll have to arrest him. Look, we don't need a communist in this country, but if we have one, I'm going to be watching over him very carefully on behalf of the nation.
EURUSD TECHS: Northbound
Jul-01 17:00
- RES 4: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1865 2.0% 10-dma envelope
- RES 2: 1.1851 High Sep 10 2021
- RES 1: 1.1830 High Jul 01
- PRICE: 1.1774 @ 15:59 BST Jul 1
- SUP 1: 1.1631 High Jun 12 and a recent breakout level
- SUP 2: 1.1554 20-day EMA
- SUP 3: 1.1446 Low Jun 19
- SUP 4: 1.1389 50-day EMA
The trend set-up in EURUSD strengthened further Tuesday and the pair continues to appreciate. Last week’s gains resulted in a breach of resistance and a bull trigger at 1.1631, the Jun 12 high. This confirms a resumption of the uptrend. The 1.1800 handle has been pierced, sights are on 1.1851, the Sep 10 2021 high. Key short-term support to watch lies at 1.1554, the 20-day EMA. A clear break of this average is required to signal scope for a deeper retracement.
OPTIONS: Mixed Rates Trade And Euribor Call Rolling Continues
Jul-01 16:52
Tuesday's Europe rates/bond options flow included:
- RXV5 126.50/125.0/125.00p fly, bought for 12 in 2k
- ERZ5 98.25c vs 2RZ5 98.00c, bought the 2yr for 1 in 10k. also bought Yesterday in 15k
- ERM6 97.75p, bought for 4.25 in 6k total
- ERU6 98.68/98.87cs x4.5 vs ERU6 98.25p x0.5, bought the cs for flat in 36k x 4k
- 0RQ5 98.125/98.1875/98.25/98.3125c condor, bought for 1.75 in 3k
- SFIU5 96.20/96.30/96.40/96.50 call condor, paper pays 2 for 8k
- SFIZ5 96.20/96.30cs, sold at 7 in 8k
- SFRZ5 96.25/96.00 1x2 put spread 2K given at 3.25
