EM LATAM CREDIT: Peru: Motion to Oust Recently Sworn in President - Neutral

Tuesday's US rates/bond options flow included:

• SFRV5 95.75/95.87/96.00c fly, traded flat in 5k (on block)
• SFRV5 95.87c, traded for 47.5 in 2k
• SFRX5 96.62/96.75cs, bought for 1 in 10k total
• SFRZ5 96.00 puts 23K given at 1.0 over several clips
• SFRZ5 96.37/96.50/96.56/96.68c condor, traded 2.25 in 2.5k
• SFRZ5 96.50/96.37/96.25p ladder, traded 2.25 in 2.5k
• 0QH6 97.00/96.75ps vs 3QH6 96.75/96.50ps, traded flat in 1.5k
• 0QH6 96.87/96.75/96.37/96.25p condor, bought for 3.5 in 1.5k
• 0QZ5 97.00/98.00 call spread sold at 21 in 7.25k

• 2026: The end-2026 dot is likely to fall a quarter-point to 3.4% from 3.6% prior. June’s projections had 4 members at the median, with 6 above and 9 below, so it would take just one of those at 3.6% to shift lower at this meeting to bring the median down a notch. That said, vs 10 seeing rates remaining above 3.50% back in June, we expect their number will shift down only slightly to 7-8. There is something of a lower bound here set by the longer-run dot of 3.0%, with 3.1% representing the median outer-year view, and we’re not sure there will be much appetite for most of the Committee to project a move any lower than 3.4%.
• 2027-28: As noted, the outer years are likely to see a settling-in at 3.1%, just above the longer-run rate. We get 2028 projections for the first time at this meeting.
• Longer-Run: The median is finely poised with 3 members at 3.00%, 8 above and 8 below, meaning there’s always a risk that the median will shift up from 3.00% (it has been drifting higher since 2022). However, this is not our base case for this meeting.
• The next increase would bring the longer-run rate back above 3.00% for the first time since March 2016, and would be up from the trough of 2.40% in 2022. 

Analyst consensus: Analysts see a slightly lower “dot” profile in the Fed funds medians vs the last edition in June. For 2025 the median is narrowly in favor of a 3.9% (unchanged) end-year median, though many see 3.6%. For 2026 most see 3.4% (down from 3.6% in June), moving to 3.1% by end 2027 (down from 3.4% in June). No analyst sees the longer-run rate changing (3.0%).

• Sorted in order of highest to lowest 2025 end-year "Dot": 

• RES 4: 1.2063 2.236 proj of the Feb 28 - Mar 18 - 247 price swing
• RES 3: 1.2000 Round number resistance 
• RES 2: 1.1923 2.00 proj of the Feb 28 - Mar 18 - 247 price swing
• RES 1: 1.1878 High Sep 16
• PRICE: 1.1868 @ 20:18 BST Sep 16
• SUP 1: 1.1694/43 20- and 50-day EMA values
• SUP 2: 1.1574 Low Aug 27
• SUP 3: 1.1528 Low Aug 5
• SUP 4: 1.1392 Low Aug 1 and bear trigger.

The trend theme in EURUSD remains bullish. Resistance at 1.1743, the Aug 22 high, has recently been cleared reinforcing a bull cycle. Tuesday’s gains have resulted in a climb above 1.1829 the Jul 01 high and bull trigger. Clearance of this hurdle confirms a resumption of the primary uptrend and opens 1.1923 next, a Fibonacci projection. Support to watch is the 50-day EMA, at 1.1643.