US OUTLOOK/OPINION: JPM Bring Forward Next Fed Cut To Sep From Dec
Aug-08 09:08
JPMorgan refined their Fed rate view after Miran was named as Gov. Kugler’s temporary replacement, pulling forward the start of four consecutive cuts to September from December.
- “Last year, Miran penned an opinion piece arguing for hawkish monetary policy. We very much doubt that remains his view today.”
- “[…] in the off chance Miran is governor by the time of the next meeting, that could imply three dissents. That’s a lot of dissents. For Powell the risk management considerations at the next meeting may go beyond balancing employment and inflation risks, and we now see the path of least resistance is to pull forward the next 25bp cut to the September meeting.”
- “We continue to look for three like-sized cuts at the subsequent three meetings before pausing indefinitely.” [They previously saw a 25bp cut in Dec before 75bp of cuts early in 2026].
- “It's not unprecedented for the Fed to ease when stocks are at or near all-time highs. It’s rarer when stocks are at the highs and inflation is above target and inflecting higher. So, an ease next meeting isn't likely to be broadly welcomed by the Committee. At the last FOMC meeting, Powell framed the labor market risks in the context of the unemployment rate. Simplifying to that one dimension, a rate of 4.4% or higher could get a larger-sized cut at the next meeting, while a rate of 4.1% or lower could prompt a few dissents for a full employment, above-target inflation cut.”
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GILT AUCTION RESULTS: Decent 4.50% Mar-35 Gilt Auction
Jul-09 09:07
The yield tail of 0.2bp was tighter than all four previous re-openings (range 0.3-0.5bps), while the bid-to-cover ratio was in line with last month’s outing at 2.89x.
- Lowest accepted price of 98.936 above the 98.8985 pre-auction mid price.
- Limited reaction in the secondary price of the Gilt since the results were published, currently trading at 98.988.
- Similarly limited reaction in Gilt futures.
FOREX: USD Index Consolidates Break Above Downtrendline
Jul-09 09:06
- Tariffs and trade remain the primary drivers of near-term sentiment, and the President surprised markets again late yesterday in announcing a 50% tariff on copper imports – triggering a near 20% rally in US-listed futures and reminding markets that the White House is not concerned with triggering intraday market vol.
- As such, trade deals and tariffs remain the focus for markets, particularly as even countries that were seen to have sealed agreements with the US – namely the UK – are still subject to tariff risk on August 1st.
- The USD Index is consolidating after the break back above downtrendline resistance drawn off the early February highs earlier in the week. CAD is the poorest performer on the day, while GBP is marginally stronger – but both currencies remain contained inside the recent range.
- The rip higher for EUR/JPY continued apace in APAC trade, with the cross rallying again to touch Y175.43 and the highest level since mid-July last year. This tips the 14-day RSI further into overbought territory, hitting 75 and signalling a further pick-up in upside momentum could be harder to come by without fresh external catalysts in the very near-term.
- Prices are fading somewhat into the NY crossover, however, tipping EUR/JPY off the overnight high and into minor negative territory.
- Final US wholesale inventories and trade sales data for May are the primary data releases Wednesday, however it’s the FOMC meeting minutes due at 1900BST/1400ET that should draw more focus – particularly concerning any discussion among the committee about a possible July rate cut.
EUR: Extending some broader small losses
Jul-09 09:05
- The EUR is extending small broader losses here, testing an intraday low against the JPY, SEK, GBP, CHF and the NOK.
- The SEK is the best performer, with EURSEK now eyeing a test to 10.1359, Monday's low, although better support is seen towards 11.0900.
- The CAD is the only Currency in the red against the EUR, but by a tiny 0.10%.
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