STIR: Than Three Cuts Priced For 2025 Ahead Of Tariff Announcement
Apr-02 10:26
- Fed Funds implied rates have slipped 1-1.5bp on recent headlines that China is to restrict companies from investing in the US.
- The implied rate path sits towards the middle of the week’s already reasonably wide range ahead of today’s “Liberation Day” tariff announcements due 1600ET, but are still dovish by post Trump inauguration standards.
- Cumulative cuts from 4.33% effective: 5bp May, 21.5bp Jun, 37.5bp Jul and 78bp Dec.
- The 77.5bp of cuts for the year compares with Monday’s 72.5-81.5bp range.
- The SOFR implied terminal yield meanwhile, at 3.37% in the U6 contract, is just 0.5bp higher than yesterday’s fresh lowest close since Oct 2024 (i.e. prior to the Nov presidential election).
- Today’s data provides near-term focus with ADP employment and final durable goods but with attention firmly on the tariffs announcement at 1600ET.
- The latter are likely to overshadow Fed Gov. Kugler (permanent voter) speaking on inflation expectations and policy making at 1630ET (text + Q&A). She last spoke Mar 25 when we interestingly honed in on core goods inflation, saying recent prints have been unhelpful and affect expectations. She was watching the pick-up in inflation and inflation expectations and reiterated that the Fed can hold rates steady for “some time”.
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EUR: FX Exchange traded Option
Mar-03 10:26
FX Exchange traded Option, covers the ECB and NFP, expiry Friday.
- EURUSD (7th Mar) 1.0450c, sold at 0.0042 in ~1k.
EQUITIES: A new 14yrs high for the EU Bank Index
Mar-03 10:18
- The bounce off the lows in Equity futures is helping the Bank Index {SX7E Index} through the February high.
- Next upside target is up to 197.88, this was the 2011 high.
(Chart source: MNI/Bloomberg).
FOREX: Dollar Drifting Ahead of Revived Tariff Deadline
Mar-03 10:10
- EUR/USD edges to a new intraday high on the back of that EZ HICP print, but the pair was bid into the release already, with the USD further softer against all others in G10. EUR/JPY also trades well through the release, briefly showing above the Friday high.
- The impact has spilled over into new intraday highs for GBP/USD, which accelerates on the break of last Friday's high at 1.2622, but the mid-week highs and major resistance are still out of reach for now at 1.2716.
- No specific headlines or newsflow behind the USD drift, but markets likely well aware of the looming deadline for Canada/Mexico/China tariffs - due Tuesday at 0501GMT/0001ET - meaning markets will be on watch today for any signals of a last-minute extension, as was the case in February.
- Outside of Monday trade, the week is fraught with event risk - Tuesday marks the final deadline for additional trade levies on Canada, Mexico and China. The additional tariffs kick in at 0501GMT/0001ET on Tuesday - meaning markets will be on watch today for any signals of a last-minute extension, as was the case in February.
- ISM Manufacturing data for February is the data highlight, with sentiment in the spotlight this month thanks to growing signals in regional Fed releases that businesses are increasingly uncertain over tariffs and price pressures. Friday's MNI Chicago Business Barometer showed prices paid lurching higher, marking the largest one-month increase since July 1957.
