STIR: Fed Rates Just About Fully Pricing Hike In December, PCE Ahead

• In the equity space, the trend condition in S&P E-Minis is bullish - moving average studies are in a bull-mode position and continue to highlight a dominant uptrend. For now, short-term pullbacks are considered corrective. However, the contract has breached support at 7472.90, the 50-day EMA. This signals potential for a deeper retracement and exposes 7357.25 and 7292.25, the Jun 26 / 11 low and a key medium-term support. The bull trigger is 7693.75, the Jun 2 high. The trend set-up in EUROSTOXX 50 futures remains bullish and price continues to trade above support. The key short-term support level to watch lies at 6204.49, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement of the Mar 23 - Jul 6 bull leg. On the upside, key resistance and the bull trigger is at 6462.00, the Jul 6 high.

• US rates have been boosted overnight by significant declines in crude oil futures following an informal US-Iran ceasefire continuing into today.
• FF cumulative hikes from 3.63% effective: 7.5bp Wed, 25bp Sep, 32.5bp Oct, 42.5bp Dec building to 52.5bp Mar 2027 and 54bp Jun 2027.
• SOFR futures are up to 3.5 ticks firmer in late 2027/2028 contracts, with the peak implied yield of 4.22% (M7) off last week’s fresh cycle high of 4.30%.
• It’s a light data docket today, headlined by preliminary durable goods for June, with Wednesday’s FOMC decision on the horizon – MNI preview: https://mni.marketnews.com/4pJOz03
• We agree there is a plausible case for a hike at this meeting, both in terms of the macro landscape and in terms of other considerations such as reinforcing perceptions of the Fed’s independence.
• But while another set of strong inflation and payrolls data since the last meeting would likely have cemented the case, the base case now probably closer to 20% for a hike at this meeting (slightly lower than market pricing) with September being more likely given recent data and what we’ve heard from Committee participants.

"*CHINA SAYS IT RESERVES RIGHT OF ALL NECESSARY MEASURES VS US" bbg

"*CHINA: WILLING TO CONTINUE TALKS ON BASIS OF MUTUAL RESPECT"