STIR: Fed Rates Little Changed, FOMC Minutes Likely More Notable Than Fedspeak
Oct-08 10:23
- Fed Funds implied rates are 0.5bp higher overnight for most near-term meetings, holding within yesterday’s range.
- Cumulative cuts from 4.08% effective: 22bp Oct, 43.5bp Dec, 53.5bp Jan, 64.5bp Mar, 71bp Apr and 85bp June.
- SOFR futures also see small moves on the day: H6 with marginal losses (-0.005) otherwise small gains beyond including +0.015 through blues and yellows.
- The SOFR implied terminal yield of 3.045% (SFRH7, -0.5bp) is also within recent ranges, eyeing a little more than 100bp of cuts ahead.
- Today’s Fedspeak focus should be on the FOMC Minutes from the Sept 16-17 meeting. Last month’s meeting revealed a lack of conviction on the FOMC about the rate path forward in both the SEP and then Chair Powell’s press conference.
- The median voter marked down their end-2025 rate 25bps to 3.5-3.75% (i.e. two further cuts in addition to the 25bp cut last month) but 2 members look for 1 cut and 6 members don’t expect another cut this year (and 1 would have preferred not to have cut at all last month).
- Other scheduled Fedspeak looks unlikely to materially add to monetary policy discussions. Nevertheless, for completeness:
- 0920ET – Musalem (’25 voter, hawk) welcoming remarks at community banking research conference
- 0930ET – Gov. Barr (voter) keynote at community banking research conference (text only)
- 1000ET – Goolsbee (’25) opening remarks at Chicago Payments Symposium
- 1515ET – Kashkari (’26) speaks at Center for Indian Country Development
- 1630ET – Kashkari (’26) hosts fireside chat with Senator Tina Smith
- 1745ET – Gov. Barr (voter) speaks on community development
- 1915ET – Goolsbee (’25) speaks at payments conference (text only)
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FOREX: NZDUSD Extends Recovery, Threatening 50-Day EMA/Trendline Resistance
Sep-08 10:23
- The New Zealand dollar has been the strongest in G10 Monday, helping NZDUSD extend its most recent recovery from the August lows to over 2%. We pointed out that 0.5800 remained a key technical hurdle on the downside, and latest dynamics following the weaker US employment data have helped foster this recovery.
- The rally places a clear focus on 50-day EMA resistance (intersecting today at 0.5921), a breach of which would counter the most recent bearish theme. Furthermore, spot is also closing in on 0.5944, short-term trendline resistance drawn from the July 01 high. Further gains would target the August 13 high at 0.5996.
- Today’s Kiwi outperformance has helped AUDNZD further moderate its recent advance to fresh cycle highs of 1.1157. Strong medium-term resistance for the cross is seen at 1.1180, which may be assisting the latest downtick towards 1.11, which could extend towards the 1.1030/00 region where more solid demand would be expected.
- In New Zealand, manufacturing activity is due Tuesday in a fairly light week for domestic data. The calendar focus is on second quarter GDP and August trade figures, scheduled across September 18/19.
GOLD: Spot Up Another 0.75% Today; PBOC Continues Streak of Net Purchases
Sep-08 10:13
Spot gold trades at another fresh all-time high this morning, currently up 0.8% at $3,616/oz. Spot may be being supported by haven flows this morning, following significant Russian drone/missile attacks on Kyiv over the weekend. Meanwhile, tailwinds from increased Fed easing expectations after Friday’s labour market report may also be at play.
- The next topside objective for gold is $3,623, the 2.236 projection of the Dec 30 ’24 - Apr 3 - 7 price swing. Clearance of this level would expose $3,675, another Fibonacci projection point. It’s worth noting that spot remains in a heavily oversold condition on a 14-day RSI basis.
- On Friday, the World Gold Council released its monthly update on ETF (as of August) and central bank (as of July) flows.
- August ETF flows totalled 53 tonnes (worth $5.5bln), the majority of which (34.9 tonnes) came in the last week of the month as the US Govt vs Lisa Cook saga exacerbated existing concerns around Fed independence.
- August ETF flows were centred in North America (37.1 tonnes) and Europe (20.8 tonnes).
- Central banks purchased 14.9 tonnes of gold in July, after 41 tonnes in June and 34.7 tonnes in May. Central banks have been net purchasers of gold for 26 months now, continuing to help underpin spot prices.
- More timely data from the PBOC overnight indicated a tenth consecutive month of net buying, with the Chinese central bank reporting another 1.9 tonnes of purchases in August.
NATURAL GAS: “US demands EU stops buying Russian gas" - FT
Sep-08 10:10
“US demands EU stops buying Russian gas if it wants new sanctions on Putin” - FT
- "European countries should stop buying Russian oil and gas if they want Washington to tighten sanctions on Moscow, according to Donald Trump’s energy chief, who said the trade was funding Vladimir Putin’s “war machine”."
- "Chris Wright, US energy secretary, told the Financial Times that European countries should instead buy American liquefied natural gas, gasoline and other fossil fuel products to meet the terms of the US-EU trade deal, which calls on EU countries to buy $750bn of US energy by the end of 2028."
- Link here
