US TSYS: Flattening Theme Extends Ahead Of Payrolls

• Fed Funds implied rates have lifted off overnight lows for back little changed on the day ahead of a solid docket for data and some important Fed commentary. They continue to imply a next rate cut only with the July meeting.
• Cumulative cuts from 4.33% effective: 1bp Jan, 9.5bp Mar, 15bp May, 23bp Jun, 27bp Jul and 37bp Dec.
• Gov. Waller (permanent voter) speaks on the economic outlook at an event in Paris at 0800ET (text + Q&A) before the FOMC minutes at 1400ET (preview here).
• Waller, who last year was an important mouthpiece for the Fed, last spoke on Dec 2 ahead of the Dec 17-18 FOMC decision. His support for a rate cut at that meeting drew a dovish reaction, and he also added that he expects rate cuts to continue over 2025 to neutral, with rates still “some distance” from neutral. In light of recent steepening themes, he at the time said that the long-run neutral rate is affected by fiscal policy. 

US President-elect Donald Trump delivered a wide-ranging press conference at his Mar-a-Lago resort in Florida on January 7, touching on various issues from energy to his foreign policy ambition of carving out a new US sphere of influence from Panama to Greenland.   

• Please find below a full summary of the presser with analysis of the key comments related to foreign policy, tariffs, energy, and legislation.

Full article: Trump Press Conference Review

Elsewhere, a reminder that our latest positioning indicator update (published yesterday) pointed to long positioning in gilt futures. That could be adding further fuel to the sell off.