FED: Summary Of Economic Projections: Slightly More Patient Dots
Summarized from our Fed preview (here) :
- 2025: Developments since the March projections point to a slight drift higher in the 2025 Fed funds rate projection, which are likely to push up the median to 4.125% (one 25bp cut) from 3.875% (two 25bp cuts).
2026-27: The 3.375% 2027 median in the March projections was quite solid: 13 of 19 members were there or below. A few dots may drift up, but it’s likely that the core of the Committee still has an easing bias, and that the decision to be more patient on cuts in 2025 doesn’t mean that the longer-run path needs to change dramatically. Regardless of the 2025-26 dots, we would expect the 2027 median to near the longer-run dot as usual for an outer-year projection. As such, 3.1% is likely to be the median again.
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USDCAD TECHS: Trend Signals Remain Bearish
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4031 50-day EMA
- RES 1: 1.4016 High May 12 / 13
- PRICE: 1.3958 @ 16:02 BST May 14
- SUP 1: 1.3814/3751 Low May 8 / 6 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 ‘24
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD maintains a firmer short-term tone. Despite the latest gains, the trend condition remains bearish and the move higher is considered corrective. A fresh cycle low last week reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4031, the 50-day EMA.
US TSYS: Projected Rat Cut Pricing Continues to Cool
- Treasuries look to finish near late Wednesday session lows, curves mixed (2s10s +1.654 at 47.722; 5s30s -.065 at 80.592) as 10s retreated to the lowest level in four weeks.
- Jun'25 10Y futures trade 109-21 (-10), session lows strengthens a bearish theme and exposes a key support at 109-08, the Apr 24 low and a bear trigger.
- Projected rate cut pricing steady in the near term while longer dates retreat vs. this morning levels (*) as follows: Jun'25 steady at -2.1bp, Jul'25 steady at -9.8bp, Sep'25 at -22.8bp (-24.7bp), Oct'25 at -34.8bp (-37.3bp), Dec'25 at -49.6bp (-52.9bp).
- No obvious headline or Block trade driver for the decline, it appeared markets were gearing up for higher inflation signals from tomorrow's heavy round of economic data: Retail Sales, PPI, Weekly Claims, Industrial Production and Capacity Utilization.
- Fed VC Jefferson continues describes the current level of rates as "moderately restrictive" (Chair Powell reiterated last week that policy was modestly or moderately restrictive, with Gov Kugler Monday also using the term "restrictive").
- Stocks trade near steady to mixed after the bell, the tech heavy Nasdaq outperforming as chip stocks outperformed for the second consecutive session.
- Cross Asset roundup: Bbg US$ index gradually recovered from early morning lows (BBDXY +1.03 at 1232.32 vs. 1224.24 low); broad decline for Gold to 3177.75 (-72.26); crude lower (WTI -.83 at 62.84.)
US OUTLOOK/OPINION: Chicago CARTS Points To Declining Ex-Auto Retail Sales
The Chicago Fed's preliminary CARTS (Chicago Fed Advance Retail Trade Summary) report is pessimistic on April Census Bureau retail sales out Thursday: it looks for retail & food services sales excluding motor vehicles & parts (ex. auto) to fall 0.6% M/M, vs +0.3% consensus.
- The recent track record here is mixed - CARTS estimated a 0.7% M/M rise in March ex-auto retail sales, and the actual figure was very close to that at 0.6%.
- However CARTS missed the mark badly in February, estimating an 0.8% M/M decline in ex-auto retail sales, vs the +0.3% actual reading (which was in line with consensus) and +0.4% in the final.
- Per the Chicago Fed, "The index summarizes weekly data on retail transactions & foot traffic, gasoline sales, and consumer sentiment, and is used to project current monthly retail & food services sales ex. auto."
