STIR: Fed Rates Holding Recent Narrow Ranges

• EURUSD’s steady approach to cycle highs at 1.1829 is garnering attention as we approach the Fed. SocGen have noted that the relatively low RSI compared to the move earlier in the year is a good sign and that the chances of a move to 1.20 this month have improved. They highlight that relative growth forecasts, relative rates, and the overall market backdrop are all on the euro’s side, for now.
• Wednesday’s Fed decision will keep short-term dollar sentiment as the primary driver for currency markets, however, the plethora of other major central bank decisions places heightened attention on a number of EUR crosses and their significant chart levels this week.
• As noted earlier, EURJPY (shown below) has been grinding towards double top resistance just below the 174 handle. Moving average studies are in a bull-mode position too, highlighting a primary uptrend. A break of 173.97 would open 174.86 (Fib projection) before 175.43, a key medium-term level. Japan’s leadership race heating up and the Bank of Japan decision due Friday provide obvious catalysts to a breakout.
• UK CPI data and the BOE decision Thursday will likely keep the market’s attention on GBP. For EURGBP specifically, the latest pullback in EURGBP appears corrective. Support to watch lies at 0.8597, the Aug 14 low. Clearance of this level would cancel a bull theme and reinstate a recent bearish threat.
• Fresh cycle highs for EURCAD on Monday continue to place the cross at the highest level since 2009. 1.6329 provides the next horizontal resistance point as we approach today’s Canada CPI and tomorrow’s BOC decision, where the central bank is expected to cut by 25bps.

Source: Bloomberg Finance L.P. / MNI

A 14th round of trade talks between the EU and India will take place from 6-10 October, following the conclusion of the latest round on 12 Sep and with an expectation that the Union announces is plans for a strategic partnership with India in the near future. This follows the State of the Union address on 10 September from European Commission President Ursula von der Leyen, where she said that in the context of US tariffs, and China's increasingly close relations with European adversaries in the forms of Russia and North Korea that, "...we need to double down on diversification and partnerships.[...] At a time when the global trading system is crumbling, we are securing the global rules through bilateral agreements. [...] Or finalising negotiations on a historic deal with India by the end of this year."

• As Euronews reported last week, the inclusion of food and farm issues (some of the most politically-charged issues for both the EU and India) in talks between trade delegations is a signal that discussions on a trade deal are nearing an end.
• The unveiling of a 'strategic partnership' between India and the EU comes at the time of significant uncertainty as to India's politicial and economic relations with the West. US President Donald Trump has imposed 50% tariffs on India. While a post on Truth Social last week indicated a potential warming in ties, significant damage has been done to US-Indian ties, which the EU may look to take advantage on with regards to trade and investment. 

• Fed Funds implied rates are near unchanged ahead of a solid docket including retail sales for August and a potential final tweak to core PCE tracking from import price data.
• Cumulative cuts from 4.33% effective: 26bp Sep, 46bp Oct, 68bp Dec, 81.5bp Jan and 95bp Mar.
• SOFR futures are near unchanged on the day, including an implied terminal yield of 2.915% eyeing a little more than 140bp of cuts from here.
• CEA’s Miran was confirmed as a Fed Governor in the senate vote yesterday (48-47), serving the final four months of a 14-year term vacated by Kugler. He should be at the FOMC meeting starting today with attention on his likely dissent and just how dovish his dot plot entry will be.
• Trump cannot fire Gov. Cook, according to the U.S. Court of Appeals for the D.C. Circuit, a ruling the Justice Department will likely appeal to the Supreme Court. We take that to mean she will be at this week’s meeting for a full contingent of voters. We should know for sure when the Fed announces that the meeting is underway.
• That said, we re-up yesterday’s MNI interview with administrative law expert Richard Pierce with a warning over Cook’s odds once the case gets to the Supreme Court (MNI INTERVIEW: Cook Could Face Long Odds Before Supreme Court - Sep 15).