STIR: Next Fed Cut Seen In July Ahead With Payrolls Eyed
Feb-07 11:16
- Fed Funds implied rates have pushed up to 1bp higher today ahead of a potentially complicated payrolls report including annual revisions. The next Fed cut is just about fully priced for July whilst the 43bp cuts for 2025 is within recent ranges.
- Cumulative cuts from 4.33% effective: 4bp Mar, 11bp May, 20bp Jun, 25.5bp Jul and 43bp Dec.
- Dallas Fed’s Logan (’26 voter) offered some notable hawkish comments in her first mon pol update in almost three months late yesterday. Interest rates could be on hold for “quite some time” and may already be near neutral considering inflation is falling toward the central bank’s target in an environment with strong demand and a stable labor market - if this continues there wouldn’t be “much” near-term room for cuts.
- "I think the possible policy strategies for the FOMC in 2025 boil down to two key alternatives. In some scenarios, it will soon be appropriate to resume reducing the federal funds target range. In other scenarios, we'll need to hold rates at least at the current level for quite some time."
- Today’s Fedspeak sees two permanent voters but with Bowman likely to repeat recent commentary:
- 0925ET – Bowman (permanent voter, hawk) gives update on economy and bank regulation (text only). This is likely to be a repeat on Wed remarks, which had an impact on swap spreads from a reduced regulatory angle rather than touching on mon pol.
- 1200ET – Kugler (permanent voter, dovish/center) speaks on entrepreneurship & productivity (text + Q&A). She last spoke on Jan 4 on a panel, seeing progress towards the 2% inflation target and suspecting the recent inflation data was a “bump”. She viewed policy as having moved to a more moderate level of restrictiveness, at a good point but watching the labor market.
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FOREX: Single Currency Edging Lower, FOMC Minutes Awaited
Jan-08 11:13
- EURUSD presses to fresh session lows in recent trade ~1.0310 amid the general firmer price action for the greenback Wednesday. The pair has been slowly eroding the rally from earlier in the week, that had been underpinned by higher-than-expected German inflation and hints that US tariffs could be more selective than first thought.
- With the underlying bullish dollar trend prevailing, EURUSD is now ~120 pips off the week’s highs and notably back below the prior breakdown point of 1.0335. Recent gains appear technically corrective and the Jan 2 sharp sell-off reinforces a dominant downtrend. The bear trigger has been defined at 1.0226, the Jan 2 low.
- ING note that the strong US macro story is fighting technical short-term bullish factors for EURUSD but believe the pair may find decent support at 1.0300 for now.
- Fed minutes and US employment represent the key risks for the pair; however, we will also receive German and French IP data along with Eurozone retail sales this week. ECB’s Villeroy will speak later today in Paris at 1815CET.
EU-BILL AUCTION RESULTS: 3/6/12-Month EU-Bills
Jan-08 11:12
| Type | 3-month EU-bill | 6-month EU-bill | 12-month EU-bill |
| Maturity | Apr 4, 2025 | Jul 4, 2025 | Jan 9, 2026 |
| Amount | E1.391bln | E1.4bln | E1.449bln |
| Target | E1.5bln | E1.5bln | E1.5bln |
| Previous | E1.137bln | E1.9bln | |
| Avg yield | 2.639% | 2.541% | 2.378% |
| Previous | 2.798% | 2.632% | |
| Bid-to-cover | 1.91x | 2.16x | 3.09x |
| Previous | 2.68x | 2.09x | |
| Previous date | Dec 04, 2024 | Dec 04, 2024 | Jan 00, 1900 |
USD: SEK and NZD are the worst performers in G10s
Jan-08 11:07
- The Kiwi has taken over the SEK as the worst performing Currency in G10, both are now circa 0.33% down versus the Greenback.
- Main initial support in NZDUSD is still at 0.5588, the early January low, and the lowest printed level since October 2022.
- The SEK is also eyeing the next decent level at 11.1860, the November high for USDSEK and its best level since early November 2023, price action has been helped following the Swedish CPI coming below expectations this Morning.
