FOREX: USD Rallies to End Losing Streak, Lack of Data Unlikely to Deter Fed

SOFR & Treasury options saw mixed flow upon the return from the extended holiday weekend, notable put selling in SOFR options as underlying futures traded weaker in the first half. Treasury futures pared losses slightly after ISM Mfg data. Projected rate cuts cool slightly vs. late Friday (*) levels: Sep'25 at -22.1bp (-22bp), Oct'25 at -35.4bp (-35.6bp), Dec'25 at -54.8bp (-56bp), Jan'26 at -65.9bp (-68.6bp).

• SOFR Options:
  • -7,500 SFRV5 95.81/96.00/96.18 put flys, 5.0 ref 96.21
  • -3,000 SFRH6 96.12/96.00 put spds, 3.0
  • +10,000 SFRZ5 96.18/96.43 1x2 call spds 1.75 ref 96.215
  • 15,000 SFRU5 95.93/96.06 call spds ref 95.9025
  • -10,000 SFRX5 96.06 put vs. 96.25/96.43 call spds, 0.0 net ref
  • 3,800 SFRV5 96.25/96.37/96.50 call flys ref 96.215
  • 2,100 SFRX5 95.93/96.06/96.18 put flys
  • 5,500 SFRU5 95.81 puts ref 95.9025
  • 2,000 0QV5 96.50 puts ref 96.98
  • 2,00 0QH6 96.62/96.75/96.75 put trees ref 97.01
• Treasury Options:
  • 3,000 FVX5 108.25/108.5/108.75/109 put condors ref 109-08.75
  • 10,000 TYV5 108/109 put spds
  • 3,200 USX5 106/111 put spds ref 113-21
  • 2,500 TYV5 110.25/110.5/111.25 broken put flys ref 112-08.5
  • -8,000 TYV5 112 straddles, 118-117
  • 5,000 FVV5 109 puts ref 109-08
  • 5,000 TYV5 113 calls ref 112-12
  • 4,450 TUV5 103.87 puts, 3 ref 104-08

• Speaking to Bloomberg Adria, ECB’s Muller said “It’s reasonable right now to take the time and monitor the economic data as it comes in the following months and take any different decisions if necessary,”
• As was the case ahead of the July ECB decision, he again sees a hold in September as one that “makes sense”.
• These remarks aren't a surprise from Muller, being very similar to Jul 25 remarks: "It is appropriate to leave interest rates unchanged for the time being when shaping monetary policy and to assess whether and when interest rates need to be adjusted again based on data in the coming months and quarters"
• More interestingly he said new ECB forecasts next week won’t change significantly from the previous batch in June.
• “In light of all of this turmoil that we have seen in the recent past, starting with the trade policy in the US, also the impact of war in Ukraine that we have now for a number of years, the economy has held up quite well in Europe,” Muller said. Looking at recent data, “we could still assume that we are more or less on the path that was already there during the last round of projections for the ECB.”

• US TSY TO SELL $85.000 BLN 8W BILL SEP 04, SETTLE SEP 09