STIR: Just One Fed Cut Seen This Year
Jan-13 11:26
- Fed Funds implied rates have continued to push higher overnight in an extension of the sell-off seen after Friday’s strong payrolls and U.Mich inflation expectations reports. A next cut has shifted from being considered around Jun-Jul meetings to not quite being fully priced for the year (admittedly 24.3bp).
- This week’s scheduled Fedspeak is much lighter after last week’s multiple mostly hawkish appearances, although with only Goolsbee speaking after payrolls.
- Next up sees Schmid (’25 voter) tomorrow before some focus on Kashkari (’26) and Williams (permanent) on Wed before the Fed’s blackout period starts on Friday midnight.
- Cumulative cuts from 4.33% effective: 0.5bp Jan, 4.5bp Mar, 8bp May, 15.5bp Jun, 17.5bp Jul and 24bp Dec.
- Recapping some of the analyst view changes since Friday’s payrolls report, ranked by a hawkish to dovish stance, all coming before this week’s inflation data:
- BofA: No longer calls for cuts. Base case for extended hold, risks for next move skewed toward a hike.
- RBC: Now see the Fed on hold at 4.25-4.5% throughout 2025.
- Barclays: Expect just one 25bp cut this year, in June, before going on a more extended hold. “We think that the FOMC will resume 25bp cuts in June 2026, when we expect it to be evident in the data that price pressures from anticipated tariffs are not fueling broader inflationary pressures. All told, we expect three 25bp cuts in 2026, timed at the final three SEP meetings. Compared to our prior baseline, this effectively shifts one 25bp cut from March 2025 to December 2026.”
- MUFG: Now see longer Fed pause with next cut in Jun and only two cuts in 2025, terminal rate lifted 25bps to 3.75-4%. They also see QT continuing for longer, eyeing updates in early summer.
- JPM: Now see next cut in June before final one in Sept.
- GS: Now sees 2 cuts (June and Dec) vs previously 3 cuts this year, but still see terminal of 3.5-3.75%.
- Citi: Now sees next cut in May vs Jan previously.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
Dec-13 21:13
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
Dec-13 21:00
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
Dec-13 20:40
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
