BONDS: EGBs-GILTS CASH CLOSE: Bunds Digest ECB Meeting Smoothly

Fed Vice Chair Jefferson gave a speech early Tuesday morning that suggested a monetary policy outlook in line with that of most of the rest of the Fed leadership, including Chair Powell. As such we would guess he is among the 9 FOMC participants who anticipate making a further 2 25bp rate cuts by year-end to a median 3.6%, the same outlook that we think is shared by the core of the FOMC.

• He says "with respect to the path of the policy rate going forward, I will continue to evaluate the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks. I will also consider and assess information about government policies and their effects on the economy."
• Like the broader Committee, "I see the risks to employment as tilted to the downside and risks to inflation to the upside. It follows that both sides of our mandate are under pressure".
• But he nods to greater risks to employment, noting "the unemployment rate could edge a bit higher this year before moving back down next year" and "With the unemployment rate at 4.3 percent, the labor market is softening, which suggests that, left unsupported, it could experience stress." As such he supported the September 25bp cut.
• On the economic landscape: "Recent data indicate that U.S. economic growth has moderated, and the risks to both sides of our dual mandate have shifted. Employment growth has slowed because of weaker growth in labor supply and a softening in labor demand. The uptick in the unemployment rate suggests that demand has fallen by a bit more than supply and that the downside risks to employment are rising. Meanwhile, higher tariffs are showing through to higher inflation for some goods. I expect that the effects of tariffs on inflation, employment, and economic activity will further show through in coming months."
• On inflation, his outlook is relatively benign, noting "core goods prices have been rising, reflecting tariff effects. In contrast, core services inflation, outside of housing, has generally trended sideways this year, while housing inflation appears to be on a gradual downward trend."
• He says that inflation expectations appear contained and "While tariff-related inflation is apparent in the prices of some goods, it is also notable that it so far has been lower than what many forecasters predicted this spring....I expect the disinflation process to resume after this year and inflation to return to the 2 percent target in the coming years."

• RES 4: 177.08 2.000 proj of the Feb 28 - Mar 18 - Apr 7 price swing 
• RES 3: 176.00 Round number resistance 
• RES 2: 175.43 High Jul 11 ‘24 and a key medium-term resistance
• RES 1: 175.13 High Sep 29    
• PRICE: 173.55 @ 16:35 BST Sep 30
• SUP 1: 173.39/172.42 Intraday low / 50-day EMA
• SUP 2: 170.97 Low Aug 14 
• SUP 3: 169.73/45 Low Jul 31 / 23.6% of the Feb 28 - Jul 28 bull leg 
• SUP 4: 168.46 Low Jul 1   

The trend EURJPY is unchanged, it remains bullish and the latest pullback is considered corrective. Recent gains confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. MA studies are in a bull-mode too, highlighting a dominant uptrend. Sights are on 175.43, the Jul 11 ‘24 high and a key M/T resistance. The 20-day EMA has been pierced. Support to watch lies at 172.42, the 50-day EMA.

• Crude has fallen further today ahead of Sunday’s OPEC meeting, amid conflicting reports on the size of a potential hike. Crude pared some losses after an OPEC statement rejected reports that the group is considering a 500k b/d increase.
• WTI Nov 25 is down by 1.5% at $62.5/bbl.
• The bloc’s retort came after a report from Bloomberg had suggested that OPEC is discussing fast tracking its latest round of supply hikes in three monthly instalments of about 500k b/d, while Reuters sources said it was around 411k b/d.
• The pullback in WTI futures refocuses attention on key support at $60.85, the Aug 13 low. A break of this level would reinstate the downtrend, with next support below there at $57.50, the May 30 low.
• Meanwhile, spot gold printed a new record high at $3,871/oz earlier today, before paring gains, with the yellow metal currently up by 0.4% at $3,849.
• The move comes ahead of a potential US government shutdown, which President Trump has said will probably occur.
• The trend condition in gold is unchanged, and a bull cycle remains in play. Today’s fresh cycle high confirms a resumption of the primary uptrend, with MA studies in a bull-mode position, highlighting a dominant uptrend.
• Sights are on $3,909.4 next, a Fibonacci projection. On the downside, support to watch lies at $3,681.6, the 20-day EMA. A pullback would be considered corrective.