STIR: Intraday Drop On PCE/Chicago PMI Weighs On Fed Rates
Jun-30 17:28
- Fed Funds implied rates out the next twelve months have moved lower today after softer PCE data and a miss for the Chicago PMI, but with moves limited on the day by an earlier increase through European hours.
- It keeps a terminal rate seen with the Nov meeting from a cumulative +33.5bp hike (-1bp on the day), with any additional hikes from the current 5.07% effective reversed by the May decision and an unchanged 60bp of cuts from the Nov terminal to 4.81% in Jun’24.
- Chicago Fed’s Goolsbee (’23 voter) didn’t move the needle earlier, noting that the Fed will get a lot more data for July – a meeting he still hasn’t decided on – albeit without much of a dovish tilt as he noted that goods inflation hasn’t come down as fast as expected.
- SOFR futures are mixed, trading up to 4.5 ticks for the Dec’23 (with the day’s most active volumes at a cumulative 335k) before fading to a 2 tick sell-off out in the Dec’24 with the pivot coming in Sep’24.
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US STOCKS: Modest Recovery Off Lows, Regional Banks Underperforming After FDIC Report
May-31 17:21
- The ESM3 has pushed to the high end of a narrow range seen in the couple of hours since its slide after the JOLTS report, a slide that continued despite real yields reversing their initial jump higher on the release.
- Currently at 4185 and off an earlier low of 4174, the move sees the contract pull back after yesterday coming just shy of testing resistance at the medium-term bull trigger of 4244 (Feb 2 high), but it hasn't tested support at the 20-day EMA of 4165.17 after which lies 4114 (May 24 low).
- It trades inline with the Nasdaq e-mini, both -0.7% on the day, whilst SPX is led lower by consumer discretionary (-1.8%), energy (-1.7%) and financials (-1.5%).
- Banks underperform within the latter, currently -2.5%, whilst the separate KBW index shows regionals in particular suffering (KRX -3.7% vs BKX -2.6%) after the FDIC said that the number of lenders with weaknesses increased in Q1.
EURUSD TECHS: Bear Cycle Remains In Play
May-31 17:00
- RES 4: 1.1007 High May 10
- RES 3: 1.0905 High May 16
- RES 2: 1.0824/48 20- and 50-day EMA values
- RES 1: 1.0759 High May 26
- PRICE: 1.0659 @ 15:33 BST May 31
- SUP 1: 1.0658 Low May 31
- SUP 2: 1.0653 76.4% retracement of the Mar 15 - Apr 26 bull run
- SUP 3: 1.0631 Low Mar 20
- SUP 4: 1.0608 Low Mar 17
The EURUSD trend needle continues to point south and the pair traded lower again Wednesday. A fresh trend low Tuesday reinforces bearish conditions. The 1.0713 objective has been breached, the Mar 24 low and this paves the way for a move towards 1.0653 next, a Fibonacci retracement point and the next key support. A firm resistance is seen at 1.0824, the 20-day EMA. Clearance of this average is required to ease current bearish pressure.
OPTIONS: Mixed Rates Structures Wednesday Amid Mostly Soft Eurozone CPI Data
May-31 16:52
Wednesday's Europe rates / bond options flow included:
- DUN3 105.30/105.00/104.70/104.30p condor, sold at 3 and 3.25 in 10k
- ERQ3 96.37/96.50/96.62c fly. Bought for 1 in 6k
- ERU3 96.00/95.75/95.50p fly, bought for 2.75 in 6.5k
- ERN3 96.25/96.375/96.50 c fly with ERQ3 96.25/96.375/96.50 c fly, bought the strip for 3.75 in 4.25k
