STIR: US Rates Clearly Show Near-Term Inflationary Impact From Trump Tariffs
- Fed Funds implied rates clearly show the initially inflationary aspects of President Trump actually imposing long-threatened tariffs over the weekend (to be effective Feb 4).
- The near-term inflationary/longer-term growth negative angle can be seen in SOFR futures, with the Sep’25 yield 6bps higher, Dec’26 unchanged and declines further out in the greens and beyond.
- Cumulative cuts from 4.33% effective: 4bp Mar, 9.5bp May, 18.5bp Jun, 23.5bp Jul, 30bp Sep, 39bp Dec.
- The March rate is 1.5bp higher, June 5.5bp higher and Dec 8.5bp higher from Friday’s close. It sees a next 25bp Fed cut now priced for September whilst the 39bp of cuts for 2025 has more than reversed last Monday’s slide on DeepSeek driven risk-off.
- The latter sits between recent extremes of 24bp seen in the aftermath of a strong payrolls report and 54bp on last week’s US tech-led slide.
- Today’s scheduled Fedspeak comes from Bostic (non-voter) on the economic outlook at 1230ET (Q&A only) before Musalem (’25 voter) at 1830ET limited to welcoming remarks.
- Bostic’s last public comments were recorded on Dec 9 (pre the Dec 17-18 FOMC meeting) but only released on Jan 7. He pushed the need for caution: “Given that kind of bumpiness in the measures, I think that will call for our policy approach to be more cautious […] And if we’ve got to err, I would err on the upside. I would want to make sure—for sure—that inflation gets to 2 percent, which means we may have to keep our policy rate higher longer than people might expect, or we may have to be more deliberate in the pacing of reducing our policy.”
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- 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 continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average 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 0.6282, the 20-day EMA.
