FED: FOMC Minutes Show Tepid-At-Best Support For December Cut
Nov-19 19:15
The biggest anticipated focus in the October FOMC meeting minutes (link) was on the degree to which support for a December cut was signaled. In short, the minutes suggest that it may only be a minority of the Committee that is pushing for a follow-up cut.
- That's largely in line with MNI's view that a majority of the broader Committee may be leaning to a December hold based on post-October FOMC commentary, though it doesn't necessarily mean that would-be cutters in December make up a majority of the 12-member voting contingent. (Below is a crib sheet on what "many" vs "several" means in the FOMC minutes - especially useful in this edition - from a guide published by the Fed Board staff).
- First off, this passage makes it pretty clear it was hardly an overwhelming majority of the 19 participants who supported an October cut, and in fact it may well have been a minority:
- "Many participants were in favor of lowering the target range for the federal funds rate at this meeting, some supported such a decision but could have also supported maintaining the level of the target range, and several were against lowering the target range."
- Recall that "many" is technically considered to be less than a "majority/most" members when it comes to Fedspeak.
- Here's what it says about December. Note that while "most" saw future cuts as appropriate, "several" of them didn't see another 25bp cut at the December meeting. And the "several" that saw a December cut is possibly less than "many" or "some", per Fedspeak parlance - indeed it's indicated to be fewer than the "many" who thought it would likely be appropriate to hold through yearend.
- "Participants expressed strongly differing views about what policy decision would most likely be appropriate at the Committee's December meeting. Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutral policy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting. Several participants assessed that a further lowering of the target range for the federal funds rate could well be appropriate in December if the economy evolved about as they expected over the coming intermeeting period. Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks."
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US OUTLOOK/OPINION: Core CPI and Early PCE Estimates Eye 0.30% M/M For Sept
Oct-20 19:05
- An early look at analyst unrounded core CPI estimates for Friday’s delayed September release sees a median estimate of 0.30% M/M, with a reasonably wide range of 0.25-0.36% M/M.
- As such, core CPI inflation is mostly expected to moderate from the 0.35% in August although it would be a third consecutive strong month after the 0.32% in July as well.
- Indeed, if accurate, it would leave there having been only two months in the past twelve with a monthly rate equivalent to less than 2% annualized (March and May). That sets it up for a more clearly cut 3.1% Y/Y after accelerating to 3.06% in August.
- Of course, the Fed targets PCE inflation, with a median of the five forecasts for core PCE also at 0.30% M/M for September. In contrast to core CPI, this would be an acceleration after 0.23% M/M in August and 0.24% in July (prior to revisions, which should be more extensive being part of the annual update).
- It's still only seen two months in the past twelve with monthly inflation below 2% annualized (March and November) whilst annual core PCE inflation was still elevated at 2.9% Y/Y in August. The median FOMC member sees this accelerating further to an average 3.1% Y/Y in Q4 before moderating to 2.6% Y/Y in 4Q26 and 2.1% Y/Y in 4Q27.
US TSYS: Late SOFR/Treasury Option Roundup: Mixed Flows
Oct-20 19:04
Rather modest SOFR/Treasury option volumes to report Monday, as the US Gov enters shutdown day 19. No data and the Fed in policy blackout. Underlying futures modestly higher (TYZ5 113-19 +4) while US$ index pares modest gains in late trade. Projected rate cut pricing cools slightly vs. late Friday levels (*): Oct'25 at -24.7bp (-25.3bp), Dec'25 at -50bp (-50.9bp), Jan'26 at -63.7bp (-64.8bp), Mar'26 at -77bp (-77.9bp).
- SOFR Options:
- 3,200 SFRM6 96.25/96.62/97.00 vall flys ref 96.87
- 2,000 SFRH6 96.37 puts, 4.0
- over +12,500 SFRZ5 96.12 puts, 0.5 ref 96.365/0.05%
- +2,500 SFRX5 96.75/96.87 call spds, cab
- -4,000 SFRZ5 96.25/96.37 call spds, 8.5
- +2,000 SFRM6 96.25/96.37 put spds, 2.0 ref 96.87
- 1,600 SFRH6 96.31/96.43 put spds
- 1,500 SFRM6 96.25/96.62/97.00 call flys
- +8,000 SFRG6 96.68/96.81/96.87/97.00 call condors, 1.75 ref 96.625 to -.63
- Treasury Options:
- 1,560 USX5 116.5/117/118 broken put flys ref 118-24
- 6,000 TUZ5 104.25 puts, ref 104-13.75
- 9,000 TYZ5 113.5/114.5 call spds, 6 ref
- 10,000 TYZ5 113.5/114.5 2x1 call spds vs. TYZ 112.5 puts
- Update, total -6,000 TYF6 113.5 straddles, 163-200 vs. 113-09 to -13.5/0.06%
- 2,000 TYX5 114/115.5 call spds, 5 ref 113-16
- 2,500 FVF6 110/111.5 call spds ref 1109-27.5
- over 5,000 TYX5 113.5/118 call spds on ratio
- over 5,000 FVX5 109.5 puts, 5.5 last
- 5,900 TYX5 113 puts, 7-8 ref 113-13.5/0.08%
- -5,000 TUZ 104.75 calls, 5 ref 104-13
- +3,000 TYH6 107.5/109 put spds, 6
- 3,000 TYF6 110/112 put spds, 23 vs. 113-11/0.20%
EURJPY TECHS: MA Studies Highlight A Dominant Uptrend
Oct-20 19:00
- RES 4: 180.33 Top of a bull channel drawn from the Feb 28 low
- RES 3: 180.00 Psychological round number
- RES 2: 178.94 1.236 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 1: 177.94 High Oct 10 and the bull trigger
- PRICE: 175.52 @ 17:15 BST Oct 20
- SUP 1: 175.19 20-day EMA
- SUP 2: 173.92 Low Oct 6 and a gap high on the daily chart
- SUP 3: 173.24 High Oct 3 and a gap low on the daily chart
- SUP 4: 172.27 Low Oct 2 and a key medium-term support
The trend structure in EURJPY is bullish - moving average studies are in a bull-mode position highlighting a dominant uptrend. Recently, the cross cleared resistance at 175.13, the Sep 29 high to confirm a resumption of the uptrend. A reversal higher would open 175.00, a Fibonacci projection. First key support to watch lies at 175.19, the 20-day EMA - a level pierced on Friday. A clear breach of it would signal scope for a deeper retracement.
