FED: Inter-Meeting FedSpeak: Cautious On Inflation, With 2 Key Exceptions (1/2)
Jul-23 19:35
Fed communications since the June FOMC meeting have been largely cautious on the inflation outlook, with little enthusiasm to resume easing until at least September if not beyond given prevailing uncertainty. We go into detail in our Inter-Meeting Fed Communications analysis - Download Full Report Here
- While this patient sentiment was reflective of the June meeting’s Dot Plot showing a split between participants eyeing either zero or two cuts by year-end, the limited incoming data since then doesn’t seem to have swayed views.
- The most notable development has been a newly-vocal minority of two on the 12-member FOMC who appear ready to argue for cuts to resume in July.
- Chair Powell largely took a July cut off the table from the outset, saying at the June FOMC meeting "it takes some time" for tariffs to be seen in prices he said then; "we feel like we're going to learn a great deal more over the summer on tariffs". He caused a minor stir on July 1 when he didn't refute the possibility of a rate cut at the July meeting: "Yeah, I really can't say - it's going to depend on the data. And we are going meeting by meeting. I mentioned, you know, how I'm thinking about that, but I wouldn't take any meeting off the table or put it directly on the table, it's going to depend on how the data evolve.
- To be sure, there are likely dissenters to a hold in July. Only two FOMC members have said that they would/could support a July rate cut, but both are permanent voters on the Board: Vice Chair Bowman ("I would support lowering the policy rate as soon as our next meeting ") Gov Waller (who delivered a July 17 speech titled "The Case for Cutting Now”).
- We could easily see two dissents to a likely July rate hold, and Bowman and Waller are likely the 3-2025 cut Dots in the June SEP.
- Our FOMC Hawk-Dove Spectrum has shifted since pre-June FOMC to reflect some of the latest commentary on future easing.
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AUDUSD TECHS: Trades Through The 50-Day EMA
Jun-23 19:30
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6479/6552 20-day EMA / High June 16 and the bull trigger
- PRICE: 0.6428 @ 15:46 BST Jun 23
- SUP 1: 0.6373 Low Jun 23
- SUP 2: 0.6357 Low May 12
- SUP 3: 0.6309 38.2% retracement of the Apr 9 - Jun 16 bull cycle
- SUP 4: 0.6275 Low Apr 14
The medium-term trend set-up in AUDUSD is unchanged, the outlook remains bullish. However, a corrective cycle is in play and this has resulted in a break of support around the 50-day EMA, at 0.6435. A clear break of this average would signal scope to a deeper correction and open 0.6357, the May 12 low. Clearance of this support would highlight a stronger reversal. Initial resistance to watch is 0.6479, the 20-day EMA.
US TSYS: Tsys Bid With Stocks, Not the Reaction You Were Expecting
Jun-23 19:26
- Treasuries looked to finish higher Monday (TYU5 +11.5 at 111-11), curves bull steepening (2s10s +2.645 at 49.176) as rates & stocks rallied on initially muted response by Iran to US bombing over the weekend.
- Stocks extended gains even after Iran launched missiles at US base in Qatar, possible face saving measure as Iran warned US prior, most if not all missiles intercepted.
- Risk gained traction on dovish comments on potential rate cuts from Fed VC Bowman and Chicago Fed Goolsbee if inflation remains muted.
- Projected rate cut pricing gains traction vs. this morning's levels (*), Dec at the highest since May 12: Jul'25 at -5.9bp (-3.6bp), Sep'25 at -25.2bp (-19.5bp), Oct'25 at -32.6bp (-40.7bp), Dec'25 at -58.8bp (-49.9bp).
- Existing home sales unexpectedly ticked up in May to a 4.03M seasonally-adjusted annual pace, from 4.00M in April (and vs 3.95M survey).
- Flash S&P manufacturing PMI held steady at 52.0 for a second month (cons 51.0) after 50.2 in both March and April whilst services dipped to 53.1 (cons 53.0) after 53.7 in May.
LOOK AHEAD: Tuesday Data Calendar: Philly Fed, Cons Confidence, Fed Speakers
Jun-23 19:13
- US Data/Speaker Calendar (prior, estimate)
- 06/24 0830 Philadelphia Fed Non-Manufacturing Activity (-41.9, --)
- 06/24 0830 Current Account Balance (-$303.9B, -$445.5B)
- 06/24 0900 FHFA House Price Index MoM (-0.1%, 0.0%)
- 06/24 0900 S&P CoreLogic CS 20-City MoM SA (-0.12%, 0.0%), YoY (4.07%, 3.94%)
- 06/24 0915 Cleveland Fed Hammack on monetary policy
- 06/24 1000 Fed Ch Powell Semiannual Testimony to House
- 06/24 1000 Richmond Fed Manufact. Index (-9, -10)
- 06/24 1000 Conf. Board Consumer Confidence (98.0, 99.8)
- 06/24 1000 Conf. Board Present Situation (135.9, --)
- 06/24 1000 Conf. Board Expectations (72.8, --)
- 06/24 1130 US Tsy $55B 6W Bill auction
- 06/24 1230 NY Fed Williams keynote remarks
- 06/24 1300 US Tsy $69B 2Y note auction (91282CNL1)
- 06/24 1345 MN Fed Kashkari town hall event
- 06/24 1400 Boston Fed Collins on nation's housing
- 06/24 1600 Fed Gov Barr welcoming remarks
- 06/24 2015 KC Fed Schmid economic outlook
- Source: Bloomberg Finance L.P. / MNI
