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Jun-11 10:30
ERH6/0RH6 98.375/98.625cs spread, bought the front for half in 20k....
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STIR: Next Cut In July Now Seen As 50/50 After US-China Progress
May-12 10:29
- Fed Funds implied rates are sharply higher on US-China trade headlines, with a next cut in July now seen as a 50/50 call and the Dec 2025 rate 10bp higher from Friday’s close.
- Signs of constructive US-China trade talks over the weekend were followed by tangible progress today in headlines at ~0300ET on US tariffs on China being cut from 145% to 30% and China tariffs on US from 125% to 10% for a 90-day period.
- Cumulative cuts from 4.33% effective: 3bp Jun, 12.5bp Jul, 28.5bp Sep, 41bp Oct and 56bp Dec.
- The 56bp of cuts for 2025 is the least priced since shortly ahead of the FOMC decision on Mar 19 and before that late Feb, i.e. now well before the initial Apr 2 Liberation Day reciprocal tariff announcements.
- The SOFR implied terminal yield meanwhile is 17.5bp higher from Friday’s close at 3.43% (SFRZ6) for now 3.5bp above Apr 2 announcement levels. This was sub-2.9% before ISM mfg as recently as May 1.
- Further Fedspeak ahead from Gov. Kugler (permanent voter) on the economic outlook at 1025ET. She spoke on Friday, saying the US is most likely close to maximum employment. A slew of other Fedspeak fresh from the FOMC blackout reiterated the need for patience amidst huge uncertainty (see a recap of last week’s heavy Fedspeak from pg 7 in the MNI Macro Weekly here)
OUTLOOK: Price Signal Summary - USDJPY Rally Extends
May-12 10:28
- In FX, EURUSD maintains a softer tone and the pair has traded lower today. Recent weakness appears corrective and key trend signals remain bullish. However, the pair has breached the 20-day EMA and this exposes the next important support at 1.1082, the 50-day EMA. A break of the average would strengthen a bear threat. Initial resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction. First resistance is at 1.1273, the 20-day EMA.
- GBPUSD has started this week’s session on a bearish note as the pair extends the correction that started Apr 29. The 20- day EMA has been breached. Furthermore, a minor head and shoulders formation on the daily chart reinforces the likelihood of a corrective pullback near-term. Key support to watch is 1.3083, the 50-day EMA. The bull trigger has been defined at 1.3444, the Apr 28 / 29 high. A break would resume the uptrend.
- The primary trend condition in USDJPY is bearish and gains since Apr 22 appear corrective. However, resistance at the 50-day EMA, at 146.19, has been cleared today. The breach highlights a stronger reversal and has exposed 148.54, the 76.4% retracement of the Mar 28 - Apr 22 bear leg. On the downside, a reversa...
BOE: Greene up next at BOE Watchers' Conference
May-12 10:26
- Megan Greene is due to take part in the on panel entitled “Monetary Policy Outlook” which is scheduled to begin at 11:30BST (note that some of the sessions earlier have started a little early).
- The slides will be published here.
- Ahead of the May meeting she was the only member of the MPC who had said that she thought tariffs were more likely to be deflationary (a view taken in the central view of the MPC projections).
- We know that both Governor Bailey and Lombardelli both saw the May decision as finely balanced. "Most" of those voting for the 25bp cut were in this camp (so we assume 3/5) with "some" seeing a stronger case regardless of the global trade uncertainties (we interpret "some" as plural so 2/5).
- We will be watching closely whether Greene identifies which of these camps she was in. Note the other two members were Breeden and Ramsden.
