FED: Key Communications Since July Show Uncertain Committee (1/3)
Aug-20 20:05
Ahead of the Jackson Hole Symposium this weekend, we've published our digest of relevant Fed commentary since the last meeting in July - PDF here.
- Our latest update includes an update of MNI's Hawk-Dove Spectrum - see below.
- Of the 18 current FOMC participants, there appears to be a nearly even split between those who at this point would likely support a rate cut in September, and those who would not. Most members may have to "wait and see" what the data holds between now and then before deciding.
- In our assessment of 18 FOMC members (down from the usual 19 due to Gov Kugler’s surprise resignation this month) we see currently 4 in favor of a September cut (2 of which are voters), 10 that could be persuaded to do so (7 of which are voters), and 4 who are likely opposed as it stands (2 of which are voters).
- Recall that the June meeting's Dot Plot showed a split between participants eyeing either zero or two cuts by year-end.
- We don't our current assessment as inconsistent with the July meeting minutes released subsequent to the publication of our Jackson Hole preview, which showed a majority "judged the upside risks to inflation" as greater than that to employment, with "several" seeing the risks as "roughly balanced" and a "couple" seeing employment risks as prevalent.
- In short, the July employment report (out after the meeting) likely shifted some more into the "several" seeing risks as "roughly balanced", while in any event the majority of the Committee is likely to be swayed at the September meeting by Chair Powell's viewpoint at that time - there are no signs he has made up his mind yet (our Jackson Hole preview suggests he may not clearly signal a September cut in his speech).
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USDCAD TECHS: Has Pierced The 50-Day EMA
Jul-21 20:00
- RES 4: 1.3920 High May 21
- RES 3: 1.3862 High May 29
- RES 2: 1.3798 High Jun 23
- RES 1: 1.3746/74 50-day EMA / High Jul 17
- PRICE: 1.3687 @ 17:15 BST Jul 21
- SUP 1: 1.3639/3557 Low Jul 08 / 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD traded lower Monday, fading off recent highs. Nonetheless, attention is on resistance at 1.3746, the 50-day EMA. It has been pierced. A clear break of it is required to highlight a possible stronger S/T reversal. This would open 1.3798, Jun 23 high. For now, a bear trend remains in place. A resumption of weakness would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the downtrend.
US TSYS: Curve Steepening Takes A Breather
Jul-21 19:56
The cash Treasury curve bull flattened Monday.
- Multiple factors helped cash Treasuries extend their rally into a 4th day, though a survey of multiple desks suggested a specific catalyst couldn't really be identified, with no tier 1 data or FOMC speakers (pre-meeting blackout period) on the docket.
- A decline in oil prices helped bring breakevens lower, with reports of a potential Russia-Ukraine meeting applying downside pressure.
- Some cited reports of potential trade tension between the US and EU ahead of the White House-imposed Aug 1 deadline for a deal. This appeared to boost EGBs in early trade, and later Treasuries may have benefited from a flight to quality, though the broader move couldn't quite be squared with the pickup in equities and the Euro.
- Additionally the Japanese House Of Councillors Election had a roughly as-expected outcome, helping global core FI in a relief rally (though we will know more when Japanese bond markets return from holiday).
- In the end it may have been a case of fading /profit taking of last week's curve steepening. Short-end yields remained relatively anchored ahead of the FOMC next week, with no change firmly expected.
- Latest levels: the 2-Yr yield is down 2.1bps at 3.8481%, 5-Yr is down 4.2bps at 3.9044%, 10-Yr is down 4.8bps at 4.3678%, and 30-Yr is down 5.1bps at 4.9368%. Sep 10-Yr futures (TY) up 13/32 at 111-06 (L: 110-24 / H: 111-9.5)
- Tuesday's data is largely second-tier, with Redbook retail sales, and Philadelphia and Richmond Fed regional activity surveys. Fed Chair Powell and Gov Bowman speak Tuesday but not on monetary policy - they are part of a regulatory conference ("Integrated Review of the Capital Framework for Large Banks Conference").
- The scheduled highlights come later in the week, starting with Thursday's jobless claims and PMI data.
OPTIONS: US Options Roundup - July 21 2025
Jul-21 19:35
Monday's US rates/bond options flow included:
- FVQ5 108 puts sold at 2.5 in 2.5k
- FVU5 108.25 Puts vs 108-13 45% Seller 26.5s 2500x
- TYQ5 111.5/113.5/115.5 call fly sold at 6 in 1K
- TYU5 112.00 calls vs. 111-08 paper paid 0-28 in 20K
- TYU5 112.50 calls vs 111-03, 20%. paper paid 0-17 on 30K
- TYU5 110/112 strangle, paper paid 0-45 on ~18.6K
- TYU5 111/110 Put 1x2 paid 3s in 1.5k
- TUU5 103.25 Puts paid 3 in 2.5k
- TYU5 110/112 Strangle paid 45 in 19K
- SFRU5 95.9375/ 96.00/ 96.0625/ 96.125 call condor bought for 0.75 in 4K
