FED: Inter-Meeting FedSpeak: Uncertainty Equals Patience For Most (2/2)
Jul-23 19:39
While a majority of participants appear open-minded to the argument that tariff inflation will prove transitory and that the labor market is “on the edge” (in Waller’s words), almost all participants require more certainty in the data and broader developments before supporting a cut.
- “Uncertainty” was cited by many as a key reason to maintain a patient stance. For example, SF’s Daly is concerned that the Fed could fall behind the easing curve but still only eyes two cuts this year, and not before the fall.
- The most hawkish Board member – Gov Kugler (who is very likely to be replaced in January at the end of her term) – saw the June inflation reports pointing to tariff pressures beginning to show up in prices. Another 2025 voter, St Louis’s Musalem, saw the possibility it could be several months if not quarters before tariffs’ full impact would be felt.
- We haven't heard any other FOMC participants say they were seriously considering supporting a cut at the next meeting, with various members that see two cuts this year eyeing a later restart to easing (Daly / Kashkari specifically mentioned the fall/September respectively).
- In other communications, the latest Beige Book suggested that regional business contacts saw the biggest price increases from inflation are yet to come.
- The June meeting minutes noted "several participants commented that the current target range for the federal funds rate may not be far above its neutral level", pointing to an increasing number of participants that suspect the terminal rate may be higher than previously expected.
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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
