STIR: Holding At ~50bp Of Fed Cuts For 2025
Jun-04 10:29
- Fed Funds implied rates for 2025 meetings are marginally higher on the day, leaving end-2025 rates close to highs seen in the hours after yesterday's JOLTS release.
- There is mild intraday spillover from better-than-expected Eurozone final service PMIs ahead of today’s US release and the ISM services print.
- Cumulative cuts from 4.33% effective: 0.5bp Jun, 6.5bp Jul, 21.5bp Sep, 33.5bp Oct and 49bp Dec.
- The SOFR implied terminal yield of 3.325% (SFRZ6, +1bp) last closed higher on May 22.
- Today’s Fedspeak is limited to just Bostic (non-voter) and Cook (permanent voter) moderating a Fed Listens Event (text only) at 0830ET.
- We think it’s unlikely anything market moving comes from the event, with the Beige Book at 1400ET more notable from a communications angle.
- Cook yesterday gave a speech that hewed very close to the FOMC majority's view on monetary policy without giving much away on her personal views on future rates (“well positioned to respond to a range of potential developments”). However, in Q&A she intriguingly noted that "we have to be open to all possibilities. We don't know how tariffs are going to play out. One could imagine those scenarios - cutting, staying or hiking, happening."
- Bostic yesterday reiterated that he thinks there’s space for one rate cut this year. He sees some indications of potential weakness in the labor market but no glaring signs of serious deterioration.
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LOOK AHEAD: Monday Data Calendar: S&P Services/Comp PMIs, ISM Services, 3Y Note
May-05 10:20
- US Data/Speaker Calendar (prior, estimate)
- 5-May 0945 S&P Global US Services PMI final (51.4, 51.2), Comp (51.2, 51.2)
- 5-May 1000 ISM Services Index (50.8, 50.3), ISM Prices Paid (60.9, 61.4)
- 5-May 1000 ISM Services New Orders (50.4, 50.0), Employ (46.2, 46.0)
- 5-May 1130 US Tsy $76B 13W & $68B 26W bill auctions
- 5-May 1300 US Tsy $58B 3Y Note auction (91282CND9)
OUTLOOK: Price Signal Summary - USDJPY Resistance Remains Intact
May-05 10:14
- In FX, a corrective cycle in EURUSD remains in play. The trend structure is unchanged, it remains bullish. MA studies are in a bull-mode position signalling a dominant uptrend, and the latest move down is allowing an overbought condition to unwind. A resumption of gains would open 1.1608, the Nov 9 2021 high. Initial key support to watch is the 20-day EMA, at 1.1264. A break of this average would signal scope for a deeper pullback.
- The latest pullback in GBPUSD is considered corrective. A bearish tweezer top formation on the daily candle chart last Monday/Tuesday, highlights a short-term top. Support to watch lies at 1.3225, the 20-day EMA. A break of this level would signal scope for a deeper retracement. Note that moving average studies remain in a bull-mode position, signalling a dominant underlying uptrend. Sights are on 1.3510, a 1.236 projection of the Feb 28 - Apr 3 - 7 price swing.
- Recent gains in USDJPY resulted in a move through the 20-day EMA, undermining the bear trend. However, price action remains below resistance at the 50-day EMA, at 146.60. A clear break of this average would highlight a possible reversal. For now, gains are considered corrective. Moving average studies remain in a bear-mode position highlighting a dominant downtrend. A resumption of the trend would open 139.79 next, a 1.382 projection of the Feb 12 - Mar 11 - 28 price swing.
OUTLOOK: Price Signal Summary - EUROSTOXX 50 Bull Cycle Remains In Play
May-05 09:56
- In the equity space, the latest recovery in S&P E-Minis reinforces current bullish conditions. The contract has traded through the 50-day EMA, at 5620.87. A continuation of the bull phase would expose 5837.25 next, the Mar 25 high and a bull trigger. It is still possible that the entire rally since Apr 7 is a correction. A reversal lower would signal the end of this corrective phase and expose initially, support at 5127.25, the Apr 21 low. First support lies at 5511.99, the 20-day EMA.
- EUROSTOXX 50 futures maintain a positive tone and Friday’s rally strengthens the current bull cycle. The contract has cleared both the 20- and 50-day EMAs, and attention is on 5263.01, the 76.4% retracement of the Mar 3 - Apr 7 bear leg. Clearance of this level would pave the way for a climb towards 5341.00, the Mar 27 high. Initial support to watch lies at 5047.80, the 20-day EMA. A breach of this level would signal a possible reversal.
