FOREX: JPY Crosses - Outside Of GBP/JPY Continue To Press Higher
Jul-15 01:36
This morning has seen US futures open a little lower after ending in the green and erasing all the losses in relation to the new tariffs, ESU5 -0.15%, NQU5 -0.15%. US Stocks have focused on the fact Trump said he is still open to more trade negotiations. The JPY continues to underperform in the crosses with only GBP/JPY pulling back on UK centric news.
- EUR/JPY - Overnight range 171.73 - 172.47, Asia is trading around 172.35. This pair has had a decent move higher and has led the charge against the JPY longs. Short-term it is starting to look a little stretched but the direction is clear and should expect demand on dips. First support 170.50 area then the more important 168.50 area.
- GBP/JPY - Overnight 198.11 - 198.79, Asia trades around 198.35. The pair has failed initially towards the 199.00/200.00 resistance a break of which could see more JPY longs pared back. First support is around 198.00 then the more important 196.50 area. Governor Andrew Bailey hinted at bigger rate cuts if the job market deteriorates further making this pair trade heavy overnight.
- NZD/JPY - Overnight range 88.02 - 88.32, Asia is currently dealing 88.25. NZD/JPY broke through the resistance around 88.00 but has failed to really follow through. Price is consolidating above 88.00 looking for a reason to extend. The Support towards 87.00/50 needs to hold for the focus to remain on the 90.00/91.00 area.
- CNH/JPY - Overnight range 20.5286 - 20.6045 Asia is currently trading around 20.6000. This pair is now back up towards the 20.60 resistance area, a sustained break back above 2.7000 will see more paring back of JPY longs.
Fig 1 : GBP/JPY Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US FISCAL: Available Extraordinary Measures Pick Up Ahead Of Tax Date
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Treasury had $144B in "extraordinary measures" available to keep the government financed as of June 11 per a release Friday. That is up from $84B a week earlier and the highest since April 28.
- However, TGA cash continues to fall, to $309B latest (lowest since early April) Combined with a pullback in Treasury cash ($376B), keeping the total resources available to avert an "x-date" in the summer at around $450B .
- There will be another uptick in Treasury cash in the coming days, and it's likely Treasury allowed some of the extraordinary measures to be rebuilt (ie not exercised) in anticipation of more cash coming in.
- This is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
FED: Two Cuts Priced This Year Headed Into FOMC Week
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As we head into the June Fed meeting week, market pricing is reflective of the FOMC’s messaging (that we describe in our preview):
- The next cut is only fully priced by the October FOMC meeting, with September seeing a roughly 80% implied probability of bringing the next 25bp reduction.
- Exactly 50bp of cuts are priced through end-2025, implying two Q4 cuts.
- That’s a shift from just after the May meeting, after which the next cut was fully priced by September, and there were closer to three cuts priced for the rest of the year.
- Overall cuts are seen backloaded this year (after 15bp in September, 29bp of cuts priced in Q4 - Oct/Dec combined), but falls off in Q1 (just 21bp cuts priced, 9bp of cuts priced for January and 12bp for March)
FED: Summary Of Economic Projections: Higher 2025 Inflation, Weaker Growth
Jun-13 20:21
The MNI Markets Team’s expectations for the updated Economic Projections are below.
- As of the May meeting, the Federal Reserve staff – whose outlook tends to be broadly shared by the median Committee member – revised their forecasts for growth weaker in 2025 and 2026, “as announced trade policies implied a larger drag on real activity relative to the policies that the staff had assumed in their previous forecast. Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years. With the drag on demand expected to start earlier and to be larger than the supply response, the output gap was projected to widen significantly over the forecast period. The labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027."
- On inflation, "The staff's inflation projection was higher than the one prepared for the March meeting. Tariffs were expected to boost inflation markedly this year and to provide a smaller boost in 2026; after that, inflation was projected to decline to 2 percent by 2027."
- Our expectations for these changes fall somewhere in between those projections and the March SEP – a slightly higher unemployment rate, substantially higher inflation in 2025 but to a lesser extent in 2026, and weaker GDP growth this year. Longer-run variables should be unchanged.
MNI Markets Team Expectations For June 2025 Summary Of Economic Projections Medians
