FED: MNI Fed Review-Jan 2025: Slightly Hawkish Hold
Jan-29 21:59
We've just published our review of the January FOMC meeting, including a comparison of the January vs December policy statements and a link to a transcript of Chair Powell's press conference. PDF here:
- The FOMC's January meeting delivered a slightly hawkish hold, tipping the balance away from a March rate cut but not really suggesting that the Committee's assessment of the monetary policy path had changed since the December meeting.
- The Statement brought a hawkish market reaction upon release with its apparent signalling of greater concern over the path of inflation, but Chair Powell - in one of his more neutral press conferences - played down that interpretation, saying it was "not meant to send a signal".
- It didn’t sound like Chair Powell's tone changed much since December's unambiguously hawkish cut, which in any case left the door open to a couple of cuts in 2025 as per the most recent median FOMC projections.
- Asked by MNI if a March cut was still "on the table", Powell appeared to downplay the possibility without dismissing it outright: "the broad sense of the Committee is we don't need to be in a hurry to adjust the policy stance."
- Rates markets saw 2025 implied cuts slightly pared after the Statement release, though Powell’s subsequent characterization of the statement changes and reiteration of the Committee’s easing bias reversed some of the initial hawkish move, particularly for rates beyond 2025. As it stands, there’s around 20% probability of a March cut (vs closer to 25% pre-meeting), with the first full 25bp reduction still not expected until June – for that matter, still just one full cut priced all year (45bp).
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FOREX: Weaker Equities Drive US$ Off Lows & Stronger Yen
Dec-30 21:43
The USD was weaker as Treasury yields fell with BBDXY falling to a low of 1300.63 but then recovering to finish up 0.1% driven by the US equity sell off, which also benefited the yen.
- USDJPY trended lower through the European/US sessions to be down 0.7% at 156.80 after a low of 156.67 earlier. Bullish conditions remain though with initial resistance at 158.08 and support at 155.89.
- Commodity currencies were stronger against the greenback with CAD appreciating the most. USDCAD fell 0.4% to 1.4355.
- Aussie and Kiwi also strengthened with AUDUSD up 0.1% to 0.6220 after reaching 0.6247, the bearish trend persists though, and NZDUSD slightly higher at 0.5638 off the intraday high of 0.5664. AUDNZD is flat at 1.1033 after falling to a low of 1.1008.
- European FX underperformed with both the euro and pound down 0.2% against the US dollar at 1.0400 and 1.2548 respectively. NOK bucked the trend and was one of the stronger G10 performers helped by rising oil prices.
- Equities were weak with the S&P down 1.1% and Euro stoxx -0.6%. Oil prices are higher with Brent up 0.4% to $74.10/bbl. Copper fell 0.8% and iron ore is stronger rising above $101/t.
- Data today includes December South Korean CPI and China’s December PMIs.
USDCAD TECHS: Bullish Flag Formation
Dec-30 21:00
- RES 4: 1.4578 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4388 @ 16:13 GMT Dec 30
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4269/4093 20- and 50-day EMA values
- SUP 3: 1.4011 Low Dec 5
- SUP 4: 1.3928 Low Nov 25 and a key support
USDCAD bulls remain in the driver’s seat and the pair is holding on to the bulk of its recent gains. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4269, the 20-day EMA. A pullback would be considered corrective.
US: CME Early Close for January 9 Day of Mourning to Honor Pres Carter Passing
Dec-30 20:31
- While the NYSE Group markets will close in observance of the National Day of Mourning for President Carter (New York Stock Exchange, NYSE American Equities, NYSE American Options, NYSE Arca Equities, NYSE Arca Options, NYSE Chicago and NYSE National), the CME Group has opted for early close, link HERE
- FI open outcry will close at 1300ET, GLOBEX shortly after at 1315ET.
- More to follow, but economic data expected that day is likely to proceed as normal (weekly jobless claims at 0930ET, Wholesale trade & inventories at 1000ET).
- Treasury auctions scheduled for January 9 remain uncertain (4- & 8W bills at 1130ET, 30Y bond re-open at 1300ET).
