STIR: ISM Services Hit Reversed Ahead Of Payrolls, Fedspeak To Follow
Dec-06 11:48
- Fed Funds implied rates are near changed overnight for the next two meetings but after that have lifted as much as 3bps for the Jun’25 to reverse Wednesday’s drop on a weaker ISM services report.
- Cumulative cuts from 4.58% effective: 17.5bp Dec, 24bp Jan, 39bp Mar and 59bp Jun.
- Today’s Fedspeak is the last scheduled before the FOMC media blackout begins 0000ET Saturday, with all appearances coming post-payrolls.
- Hammack is probably the pick today as we haven’t much from her since she formally assumed her current voting role in September. However, in the event of an ambiguous payrolls report, Bowman can carry asymmetrical risks if the usually hawkish FOMC member offers support for another 25bp cut this month.
- As for hawkish implications, we expect Fedspeak will only really come into its own in the event of a much stronger than expected payrolls report. However, CPI would still need to be solid to help firm up support for a Fed pause, which comes in the blackout period and would require less official channels of Fed communication.
- 0915ET Bowman (permanent voter, hawk) at the Missouri Bankers Association (just Q&A)
- 1030ET Goolsbee (’25, dove) in fireside chat at economic symposium (just Q&A)
- 1200ET Hammack (’24) gives speech on economic outlook (text + Q&A)
- 1300ET Daly (’24) in moderated conversation (just Q&A)
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OUTLOOK: USDJPY Clears Key Resistance
Nov-06 11:36
- In FX, a sharp sell-off today in EURUSD has resulted in a clear reversal of the recent Oct 23 - Nov 5 correction. The breach of 1.0761, the Oct 23 low, confirms a resumption of the downtrend. This paves the way for an extension towards 1.0666, the Jun 26 low. Key short-term resistance has been defined at 1.0937, the Nov 5 and today’s intraday high. A clear break of this hurdle is required to highlight a potential reversal. Initial resistance is 1.0832, the Nov 1 low.
- The trend condition in GBPUSD remains bearish and today’s sharp sell-off reinforces current conditions and highlights the end of the recent corrective bounce. Sights are on key short-term support and the bear trigger at 1.2844, the Oct 31 low. A break of this level would confirm a resumption of the downtrend and open 1.2799, the Aug 15 low. Key short-term resistance has been defined at 1.3048, today’s intraday high.
- The USDJPY trend needle continues to point north and today’s gains reinforce current conditions. The pair has traded above 153.88, the Oct 28 high, to highlight a resumption of the uptrend. A continuation higher would open 155.27,a 2.00 projection of the Sep 16 - 27 - 30 price swing. Initial firm support is 150.93, the 20-day EMA. A break of this average would instead signal the start of a short-term corrective cycle.
US TSY FUTURES: BLOCK: Dec'24 10Y Buy
Nov-06 11:36
- +5,000 TYZ4 109-10.5, buy through 109-09.5 post time offer at 0619:23ET, DV01 $322,000. The 10Y contract trades 109-13.5 last.
STIR: Fed Rates Unchanged For Tomorrow But Firmly Steeper Thereafter
Nov-06 11:33
- Former President Trump being projected to win the election hasn’t altered expectations for tomorrow’s FOMC decision (24.5bp cut priced) but the steepening bias is clearly seen beyond further out.
- Cumulative cuts from 4.83% effective: 24.5bp Nov, 42bp Dec (vs 44bp yday close), 54bp Jan (59bp) and 91bp June (99bp).
- See the earlier STIR post for the clear underperformance of US rates compared to their European counterparts where trade policy implications weighs on growth prospects, along with the continued climb in US terminal rate expectations.
- A reminder of the MNI Fed Preview for tomorrow’s decision, found here: https://media.marketnews.com/Fed_Prev_Nov2024_With_Analysts_d4a81c3019.pdf
