STIR: Implied 2025 Cuts Edge Higher After Fed Minutes
The futures-implied Fed funds path shows slightly more anticipated easing following the release of the January FOMC minutes.
- We would attribute this dovish reaction mainly to speculation that the Fed may be closer to ending QT than previously thought based on the extensive discussion on balance sheet policy in the January meeting minutes (though as we noted earlier, it seems such sentiments remain in the minority on the Committee).
- While the minutes release nudged cumulative 2025 pricing less than 1bp lower, the biggest move of the session was on headlines earlier in the session on US -Ukraine-Russia negotiations which appeared to help steer rates and equities lower.
- The first full 25bp rate cut remains priced only by September's meeting but more fully after today's moves (27bp vs 25bp prior session), with cumulative cuts for 2025 totaling 37-38bp to 3.96% (vs 35bp and 3.94% prior).
| 2025 Meeting | Current FF Implieds (%), LH | Cumulative Change From Current Rate (bp) | Incremental Chg (bp) | Prior Session (Feb 18) | Chg Since Then (bp) |
| Mar 19 | 4.32 | -0.6 | -0.6 | 4.32 | 0.0 |
| May 07 | 4.30 | -3.3 | -2.7 | 4.29 | 0.7 |
| Jun 18 | 4.20 | -13.1 | -9.8 | 4.21 | -0.7 |
| Jul 30 | 4.15 | -18.2 | -5.1 | 4.16 | -1.0 |
| Sep 17 | 4.06 | -27.2 | -9.0 | 4.08 | -1.8 |
| Oct 29 | 4.02 | -31.3 | -4.1 | 4.03 | -1.5 |
| Dec 10 | 3.96 | -37.4 | -6.1 | 3.98 | -2.3 |
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AUDUSD TECHS: Corrective Bounce
- RES 4: 0.6429 High Dec 12
- RES 3: 0.6384 High Dec 13
- RES 2: 0.6335 50-day EMA
- RES 1: 0.6302 High Jan 6
- PRICE: 0.6261 @ 16:49 GMT Jan 20
- SUP 1: 0.6131 Low Jan 13
- SUP 3: 0.6100 Round number support
- SUP 3: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 4: 0.5994 1.618proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the latest recovery appears corrective. The pair has recently breached 0.6179, Dec 31 low, maintaining the price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position too. Scope is seen for an extension towards 0.6100. Resistance at 0.6229, the 20-day EMA, has been pierced. The next resistance to watch is 0.6335, the 50-day EMA.
CANADA: Desjardins: BoC's Core Measures Will Be Shielded From Tax Adjustments
- Desjardins warn that the December CPI report will “need to be carefully parsed as the GST holiday will drive at most 12% of the basket materially lower.”
- They see headline CPI falling -0.3% M/M for an unchanged 1.9% Y/Y. “Were it not for the tax holiday, base effects would probably have pushed headline inflation up to 2.2% from 1.9%.”
- “The GST holiday aside, some components of inflation could rebound in December due to particularly aggressive Black Friday discounts that held back price growth in November.”
- “The Bank of Canada’s preferred measures of core inflation rely on pre‐tax data and so will be shielded from any adjustments to taxes.”
- “Still, the trimmed-mean measure now includes mortgage interest costs, which is biasing the calculation higher. As such, we will be looking at the Bank of Canada’s core measures excluding shelter to get a better gauge of underlying inflationary pressures.”
EURJPY TECHS: Pierces Support
- RES 4: 165.43 High Nov 8
- RES 3: 164.90 High Dec 30 and a key short-term resistance
- RES 2: 164.55 High Jan 7
- RES 1: 162.08/89 50-day EMA / High Jan 15
- PRICE: 161.86 @ 16:48 GMT Jan 20
- SUP 1: 159.73 Low Jan 17
- SUP 2: 159.51 61.8% retracement of the Dec 3 - 30 bull cycle
- SUP 3: 158.67 Low Dec 11
- SUP 4: 158.24 76.4% retracement of the Dec 3 - 30 bull cycle
EURJPY traded lower last Thursday marking an extension of the current bear cycle. The cross has pierced support at 160.04, the Jan 13 low. A clear break of this level would strengthen a bearish threat and signal scope for a deeper retracement. The next price point to watch is 159.51, a Fibonacci retracement. The cross has recovered from its recent lows, a move above 162.89, the Jan 15 high, would reinstate the recent bullish theme.
