FED: Powell Testimony Eyed For Takes On Latest Jobs And CPI Data
Fed Chair Powell is due to deliver testimony on the Semiannual Monetary Policy Report to the Congress on Feb 11-12, starting with the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday (1000ET/1500GMT), and to the House Committee on Financial Services on Wednesday (also 1000ET/1500GMT).
- These don't always result in market-moving comments but often do, with the previous testimony in July for example seeing a dovish reaction to Powell's remark that "it doesn't seem likely" that the FOMC's next move would be a hike.
- The Fed is in data-dependent mode as it decides when and indeed if to cut rates further, so we will be looking for Powell's first reactions to the January employment report, which showed substantial historical revisions alongside a lower unemployment rate and greater wage pressures, and the January CPI report which is released shortly before his House session.
- Powell's also likely to receive questions on the future path of policy rates and how the FOMC will react to shifts in fiscal and trade policy, but with the occasion calling for an even more apolitical take than usual, he is likely to be evasive (as he said in January: "this is no different than any other set of policy changes at the beginning of an administration...we'll patiently watch and understand and kind of not be in a hurry to get to a place of understanding what our policy response should be until we see how it plays out.")
- He's likely to reiterate in some form that "we do not need to be in a hurry to adjust our policy stance", with policy "well-positioned" to address developments as they arise, though once again we will be interested in how he characterizes the current degree of policy restrictiveness (Powell in January: "not highly restrictive, but meaningfully restrictive").
- There is no publicly known time for the publication of Powell's prepared remarks for his testimony before the Senate committee at 1000ET.
- More often than not, though, the text is released at the time the testimony session is scheduled to begin, particularly when the Senate appearance comes the day before the House appearance. That is the case on February 11, and was the case at the previous testimony in July.
- The published Semi-Annual report was released Friday, available here (PDF link)
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AUSSIE 10-YEAR TECHS: (H5) Bearish Structure
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.851 - High Dec 11
- PRICE: 95.435 @ 20:03 GMT Jan 8
- SUP 1: 95.373 - 0.618 proj of the Dec 11 - 23 - 31 price swing
- SUP 2: 95.275 - Low Nov 14
- SUP 3: 94.590 - 1.0% 10-dma envelope
The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851, and has traded through the Dec low. A stronger bearish reversal would expose 95.275, the Nov 14 low and a key support. A break of this level would strengthen a bearish theme. For bulls, a reversal higher and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.
AUDUSD TECHS: Resistance Remains Intact
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6388 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6269/0.6302 20-day EMA / High Jan 6
- PRICE: 0.6214 @ 20:30 GMT Jan 8
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair has pulled back from Monday’s high. Recent weakness maintains the price sequence of lower lows and lower highs. Note that MA studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6269, 20-day EMA. It has been pierced. The 50-day EMA is at 0.6388.
US TSYS: Rates & Stocks Still Prone to Headline Sensitivity
- Markets remain sensitive to headline risk Wednesday, stocks and rates sold off after early headlines reported Trump is considering declaring a state of emergency to enact universal tariffs (opposite reaction from Monday's early rally on WAPO article that suggested a watered down tariff plan). Mar'25 10Y futures breached round number support to 107-28.5 low, 10Y yield hit a high of 4.7280% on the move.
- Rates and stocks bounced after Fed Gov Waller argued for further rate cuts if the economy unfolds as expected, while adding he doesn't see tariffs as being inflationary. Mar'25 10Y futures climbed to 108-09 while curves climbed to new/near 3Y highs (2s10s 42.887, 5s30s 48.363).
- Muted reaction to jobless claims data that were on balance a little better than expected (201k vs. 215k est), ADP employment was softer than expected in December at 122k (cons 140k) after an unrevised 146k in Nov.
- Risk sentiment cooled slightly after the December FOMC minutes underscored a shift toward a slower pace in cutting rates citing rising upside risks to inflation and elevated uncertainty over potential changes in trade and immigration policy from incoming Republican leadership.
- Reminder: Open outcry and CME Globex trading session for interest rate products will have an early close of 1300 ET and 1315ET, respectively on January 9, 2025. All transactions submitted on CME ClearPort will have normal hours. Settlement prices will be derived at 1300ET. Sole data point tomorrow: Challenger Job Cuts at 0730ET; Tsy 4- and 8W bill auctions, and several Fed speakers through the day.
