STIR: Dovish Waller Has Some Lasting Impact, FOMC Blackout Starts Tonight
Jul-18 10:32
- Fed Funds implied rates are 0.5-2bp lower for 2025 meetings from Friday’s close after Fed Governor Waller’s reiteration of dovish comments late yesterday.
- The near-term path remains a little more hawkish than prior to Tuesday’s CPI report which contained some stronger underlying details for core goods. There have been many developments since then, including a dovish PPI report and Trump-Powell termination back and forth before a strong retail sales report but dovish import prices.
- Cumulative cuts from 4.33% effective: 1bp Jul, 15.5bp Sept, 28bp Oct, 44.5bp Dec, 55bp Jan and 69.5bp Mar.
- The SOFR implied terminal yield of 3.205% (SFRZ6, -3bp) implies roughly 4.5 cuts from current levels.
- Gov. Waller (permanent voter) late yesterday clearly doubled down on his dovish stance, starting his speech with “My purpose this evening is to explain why I believe that the FOMC should reduce our policy rate by 25 basis points at our next meeting.”
- He speaks again on Bloomberg TV at 0800ET and is currently the last scheduled appearance ahead of the FOMC media blackout starting 0001ET Saturday ahead of the Jul 29-30 meeting.
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OPTIONS: Expiries for Jun18 NY cut 1000ET (Source DTCC)
Jun-18 10:30
- EUR/USD: $1.1500(E2.2bln), $1.1600-04(E1.0bln), $1.1645-50(E1.2bln)
- USD/JPY: Y144.00($725mln)
- NZD/USD: $0.5760(N$1.2bln)
- USD/CAD: C$1.3600($1.4bln)
- USD/CNY: Cny7.3000($858mln)
OUTLOOK: Price Signal Summary - USDJPY Outlook Trend Structure Remains Bearish
Jun-18 10:30
- In FX, the trend set-up in EURUSD remains bullish and short-term weakness is for now considered corrective. Recent gains have resulted in a breach of 1.1573, the Apr 21 high. This strengthens the bullish theme and confirms a resumption of this year's uptrend. Scope is seen for a climb towards 1.1696, a 1.618 projection of the Feb 28 - Mar 18 - 27 price swing. Initial firm support is at 1.1425, the 20-day EMA. The 50-day EMA lies at 1.1286. Short-term weakness is considered corrective.
- A sharp sell-off in GBPUSD resulted in a breach of support at the 20-day EMA, at 1.3496. The latest move down is considered corrective and key trend signals remain bullish. The next important support lies at 1.3350, the 50-day EMA. On the upside, the key resistance and bull trigger has been defined at 1.3632, the Jun 13 high. A break of this hurdle would confirm a resumption of the primary uptrend.
- USDJPY is holding on to its most recent gains. A bearish trend condition remains intact and recent gains are considered corrective. Moving average studies are in a bear-mode position highlighting a dominant downtrend. A resumption of weakness would open 142.12, the May 27 low. On the upside, key short-term resistance is 146.28, the May 29 high. First resistance is 145.46, Jun 11 high.
STIR: Fed Not Seen Cutting Until October Ahead Of Today’s FOMC w/ Dot Plot
Jun-18 10:29
- Fed Funds implied rates are 2bp lower than yesterday’s most hawkish levels for the Dec’25 FOMC meeting although still only have a next cut priced for October.
- Cumulative cuts from 4.33% effective: 0bp for today, 3.5bp Jul, 18.5bp Sep, 30bp Oct and 46bp Dec.
- The SOFR implied terminal yield of 3.265% (SFRZ6) is 1.5bp lower on the day, consolidating yesterday’s twist flattening on intensification in geopolitical tensions.
- Today’s docket is of course headlined by the FOMC decision. MNI Preview here.
- Special mention does however go to weekly jobless at 0830ET, brought a day forward owing to tomorrow’s Juneteenth holiday. Initial claims cover a payrolls reference period whilst continuing claims will be watched after their notable push higher in the latest two weeks.
