FED: Current FOMC Voters Split On September Rate Cut (2/3)
The first two members in the “September cut” column on the FOMC are permanent voters Bowman and Waller, who said that they voted against the central bank's "wait and see" rate policy in July because upside risks to price stability have diminished and it was time to proactively hedge against further weakening in the economy and the risk of damage to the labor market. Bowman said this month she’d support 3 rate cuts through year-end (ie at each remaining meeting).
- It’s arguable that Gov Cook sounded increasingly minded to a September cut when she commented after the August payrolls report that the labor market could be at an “inflection point” – but she didn’t outright endorse one. And the other permanent voters – Powell, Barr, Williams, and Jefferson – haven’t commented since the July meeting (or August payrolls report). We would expect the Board members (ex-Bowman/Waller) to vote more or less as a bloc.
- Among the 4 regional Fed voters in 2025, the 3 who have commented on monetary policy since the July rate hold have not explicitly ruled out support for a September cut, but nor have they endorsed one.
- Chicago Fed Pres Goolsbee said that while FOMC meetings in the fall are "going to be live", he didn’t offer much in the way of overt support for a rate cut in September. Indeed he says he's "uneasy" about the idea that tariffs have only a one-off impact on prices, and that "the hardest thing that a central bank ever has to do is try to get the timing right when there are moments of transition."
- Kansas City’s Schmid hinted that he wouldn't support a rate cut as soon as September, and could even dissent against such a decision. “retaining a modestly restrictive monetary policy stance remains appropriate for the time being …First, while monetary policy might currently be restrictive, it is not very restrictive. And second, given recent price pressures, a modestly restrictive stance is exactly where we want to be.”
- St Louis’s Musalem sounded worried about deviations from both the employment and price stability mandates, so “for me, it’s too early to say exactly what policy I will be able to support.”
- Boston’s Collins hasn’t spoken since the July meeting, but signalled last month that her view at that time was that one rate cut by year-end would likely be appropriate, putting her on the relatively hawkish end of the FOMC spectrum.
So among voters, that suggests about 2 will definitely support a cut (Bowman, Waller), 2 are probably opposed (Schmid, Musalem), and the remaining 7 (Goolsbee, Cook, Powell, Barr, Williams, Jefferson, Collins) may not yet be convinced.
- Here we exclude CEA chairman Stephen Miran, who has been nominated to Kugler’s board seat and who plausibly could be in place by the September meeting – per Politico: “‘The White House has been aggressively pushing Dr. Miran’s nomination to the Federal Reserve Board, setting the stage for his quick confirmation when the Senate returns in September,’ said a White House official”. If he’s in place by the meeting, that’s a clear addition to the cut column.
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USDCAD TECHS: Has Pierced The 50-Day EMA
- RES 4: 1.3920 High May 21
- RES 3: 1.3862 High May 29
- RES 2: 1.3798 High Jun 23
- RES 1: 1.3746/74 50-day EMA / High Jul 17
- PRICE: 1.3687 @ 17:15 BST Jul 21
- SUP 1: 1.3639/3557 Low Jul 08 / 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 traded lower Monday, fading off recent highs. Nonetheless, attention is on resistance at 1.3746, the 50-day EMA. It has been pierced. A clear break of it is required to highlight a possible stronger S/T reversal. This would open 1.3798, Jun 23 high. For now, a bear trend remains in place. A resumption of weakness would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the downtrend.
US TSYS: Curve Steepening Takes A Breather
The cash Treasury curve bull flattened Monday.
- Multiple factors helped cash Treasuries extend their rally into a 4th day, though a survey of multiple desks suggested a specific catalyst couldn't really be identified, with no tier 1 data or FOMC speakers (pre-meeting blackout period) on the docket.
- A decline in oil prices helped bring breakevens lower, with reports of a potential Russia-Ukraine meeting applying downside pressure.
- Some cited reports of potential trade tension between the US and EU ahead of the White House-imposed Aug 1 deadline for a deal. This appeared to boost EGBs in early trade, and later Treasuries may have benefited from a flight to quality, though the broader move couldn't quite be squared with the pickup in equities and the Euro.
- Additionally the Japanese House Of Councillors Election had a roughly as-expected outcome, helping global core FI in a relief rally (though we will know more when Japanese bond markets return from holiday).
- In the end it may have been a case of fading /profit taking of last week's curve steepening. Short-end yields remained relatively anchored ahead of the FOMC next week, with no change firmly expected.
- Latest levels: the 2-Yr yield is down 2.1bps at 3.8481%, 5-Yr is down 4.2bps at 3.9044%, 10-Yr is down 4.8bps at 4.3678%, and 30-Yr is down 5.1bps at 4.9368%. Sep 10-Yr futures (TY) up 13/32 at 111-06 (L: 110-24 / H: 111-9.5)
- Tuesday's data is largely second-tier, with Redbook retail sales, and Philadelphia and Richmond Fed regional activity surveys. Fed Chair Powell and Gov Bowman speak Tuesday but not on monetary policy - they are part of a regulatory conference ("Integrated Review of the Capital Framework for Large Banks Conference").
- The scheduled highlights come later in the week, starting with Thursday's jobless claims and PMI data.
OPTIONS: US Options Roundup - July 21 2025
Monday's US rates/bond options flow included:
- FVQ5 108 puts sold at 2.5 in 2.5k
- FVU5 108.25 Puts vs 108-13 45% Seller 26.5s 2500x
- TYQ5 111.5/113.5/115.5 call fly sold at 6 in 1K
- TYU5 112.00 calls vs. 111-08 paper paid 0-28 in 20K
- TYU5 112.50 calls vs 111-03, 20%. paper paid 0-17 on 30K
- TYU5 110/112 strangle, paper paid 0-45 on ~18.6K
- TYU5 111/110 Put 1x2 paid 3s in 1.5k
- TUU5 103.25 Puts paid 3 in 2.5k
- TYU5 110/112 Strangle paid 45 in 19K
- SFRU5 95.9375/ 96.00/ 96.0625/ 96.125 call condor bought for 0.75 in 4K
