FED: Barclays Adds A Cut To 2025 Fed View
Barclays analysts now expect three Fed cuts in the remainder of the year, adding October to their pre-existing call for 25bp reductions in September and December. "Given the disappointing August employment report, we expect the FOMC to see more elevated downside risks to the employment side of the mandate."
- As for a 50bp September cut, "we think that the FOMC will view [that] as sending too strong a signal that labor market conditions are deteriorating. Indeed, we think that participants such as Powell understand that the slower pace of payroll employment reflects at least, in part, slower labor supply, which does not translate into increased labor market slack."
- For 2026 they continue to expect 25bp cuts in March and June to 3.00-3.25%, but "we do not think the FOMC will be able to cut rates more than twice next year, as we think that activity will show some slight acceleration, with the economy adapting to the new tariff environment and fiscal policy providing some support, and the unemployment rate will revert down amid limited increase in labor supply."
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US DATA: NY Fed's GSCPI Implies Limited Supply Chain Issues For Inflation
The NY Fed's Global Supply Chain Pressure Index (GSCPI) continued to show relatively tame supply chain tightness in July, falling to 0.07 from 0.14 in June (rev from 0.00).
- The index is in standard deviations from the historical average and as such the current level is extremely "normal", in contrast with the pandemic peak when it exceeded 4 deviations from the average.
- At that time, supply chain issues applied upward supply-side pressure on goods price inflation.
- This time, it doesn't appear to be a major concern, with plenty of tariff-related reasons to be concerned core goods prices picking up further going forward.
USDCAD TECHS: Remains Under Pressure
- RES 4: 1.4111 Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3920 High May 21
- RES 1: 1.3879 High Aug 1
- PRICE: 1.3744 @ 16:14 BST Aug 6
- SUP 1: 1.3732/3557 20-day EMA / Low Jul 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD remains subdued, extending losses on the back of last Friday’s USD weakness. Initial firm support remains at 1.3732, the 20-day EMA, a break below which would resume the correction off the early August high at 1.3879. On the recent run higher, price traded through the 50-day EMA at 1.3743, which aided the rally. This week’s price action, however, has cancelled that bullish threat and returned focus lower. The 100-dma becomes a key pivot point: at 1.3841 last.
US TSYS: Treasuries Reverse Midmorning Knee-Jerk Dive, 10Y Note Sale Tailed
- Treasuries look to finish near steady (FVU5 -.25) to mixed, curves steeper (2s10s +3.084 at 51.452) with the short end outperforming. Rates had gapped lower midmorning: TYU5 tapped 111-26.5 low before rebounding almost as quickly, not headline or Block driven though some 60k TYU traded over short period - deemed likely error driven.
- The Sep'25 10Y futures contract currently trades 112-07 (-2.5). Treasury futures remain strong on the back of the post-NFP rally having cleared resistance into the bull trigger at 112-12+, the Jul 1 high. This opens the May 1 high for direction at 112-23, a multi-month high. Clearance here opens retracement levels layered between 113-07 and 113-23.
- Speculation over whether Pres Trump will announce new Russia sanctions or nominees for Fed governor or BLS head, however, tethered risk appetites somewhat. Trump reportedly wants to meet with Putin and Zelenskiy next week sometime.
- Treasury futures retreated slightly (TYU5 -7 at 112-07.5, 4.2375% yld) after the $42B 10Y note auction (91282CNT4) tailed 1bp: drawing 4.255% high yield vs. 4.245% WI; 2.35x bid-to-cover vs. 2.61x prior.
- Limited midweek data, focus turns to ECB's economic bulletin tomorrow, US weekly jobless claims & unit labor costs, and latest Chinese trade balance numbers. Fed's Bostic expected to address monetary policy shortly after BoE rate decision.
