FED: Jan FOMC Minutes: Eyeing Inflation Language Change And Tariff Talk

Heavy SOFR & Treasury call volume reported Wednesday after slightly softer-than-expected round of core and supercore CPI data spurred a strong rally in underlying rates: TYH5 at 108-09.5 (+30) vs. 108-13 high. Curves mixed however: 2s10s -3.416 at 38.723, 5s30s +5.544 at 43.118. Projected rate cuts through mid-2025 moved forward on the calendar with July now fully pricing in a 25bp cut. Current vs. this morning levels* as follows: Jan'25 steady at -0.7bp, Mar'25 at -7.4bp (-4.9bp), May'25 -13.5bp (-10.3bp), Jun'25 -22.9bp (-17.7bp), Jul'25 at -27.2bp (-21.7bp).

• SOFR Options:
  • +10,000 SFRM5 98.37 calls, 0.75 vs 95.925/0.05%
  • +25,000 SFRZ5 96.50/97.00 call spds, 8.25 ref 96.00
  • +5,000 0QH 95.75/96.18 call over risk reversals, 2.5 net vs. 96.005/0.70%
  • +5,000 0QK5 96.25/96.62 csll spds 9.0 ref 96.01
  • +10,000 SFRH5 95.87/96.00/96.12 call trees, 0.25 ref 95.77
  • +2,500 SFRM5 95.75/95.93/96.18/96.37 call condors, 5.5 ref 95.90
  • Block, -2,500 0QG5/0QH5 96.12/96.37 2x3 call spd spds, 0.0 net/Feb over
  • -5,000 2QM5 94.75 puts, 3.5 ref 95.87
  • +5,000 SFRJ5 95.62/95.75/95.87 put tree, 5.5 ref 95.91
  • +5,000 SFRU5 96.25/97.00/97.25 call flys, 4.25 ref 95.985
  • -15,000 SFRH5 95.75/95.93 call spds, 4.25 vs. 95.87/0.39%
  • -12,000 SFRZ5 95.62/95.87 put spds w/ 95.68/95.93 put spd strip, 25.75 cr ref 95.92
  • over 13,000 SFRJ5 96.25/96.50 call spds 
  • over 7,100 SFRJ5 96.00 calls 
  • 3,600 SFRJ5 95.81/95.93/96.06 call flys ref 95.85
  • 1,650 SFRM5 95.93/96.12 call spds vs. 95.56/95.68 put spds ref 95.845
  • 3,500 0QU5/3QU5 95.25 put spds, 2.5 cr flattener (3QU sold over)
  • 1,200 SFRZ5 99/100/101 call flys ref 95.91
• Treasury Options:
  • 1,300 TYH5 105/106/107 1x3x2 call flys ref 108-09
  • 4,500 FVG5 107/108 call spds ref 105-30.5
  • 13,000 TYH5 109 calls, 32 ref 108-05, total volume over 23,000
  • over 9,700 TYH5 110 calls, 16 last ref 108-04.5
  • 11,000 TYG5 106/107 put spds 4 ref 108-03.5
  • over 31,000 wk3 TY 108.25 calls, 5 vs. 107-16.5/0.17% (expire Friday)
  • 4,000 TYG5 108/108.5 2x3 call spds ref 107-17
  • 5,000 TYH5 106 puts 22 ref 107-17
  • 4,000 wk3 TY 108/108.5 2x3 call spds ref 107-17
  • 8,000 TYH5 106/107 put spds ref 107-17
  • 4,600 TYG5 107.75/108.5 call spds, 13 ref 107-16.5
  • 3,500 TYH5 108/109.5 2x3 call spds ref 107-16.5
  • +3,000 FVH5 107/108 call spds, 5.5 ref 105-16.5
  • 2,000 TYG5 105.75/106.75 put spds trf 107-14.5
  • Block, +9,000 wk3 TY 108 calls 8 vs. 107-15.5/0.25%, more on screen at 9
  • 4,000 FVH5 106.5/107 call spds, 6.0-6.5 ref 105-17.5 to -16

• RES 4: 1.0630 High Dec 06
• RES 3: 1.0513 50-day EMA
• RES 2: 1.0437/58 High Jan 6 / High Dec 30
• RES 1: 1.0356 20-day EMA
• PRICE: 1.0292 @ 19:56 GMT Jan 15
• SUP 1: 1.0178 Low Jan 13  
• SUP 2: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
• SUP 3: 1.0122 2.0% 10-dma envelope
• SUP 4: 1.0031 2.000 proj of the Sep 25 - Oct 23 - Nov 5 price swing    

The trend condition in EURUSD remains bearish and the latest recovery is considered corrective. Last week’s move lower resulted in a print below 1.0226, the Jan 2 low. The breach of this support confirms a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs. Sights are on 1.0138 next, a Fibonacci projection. Resistance to watch is 1.0437, the Jan 6 high.

• RES 4: 1.2607 High Dec 30
• RES 3: 1.2597 50-day EMA     
• RES 2: 1.2433 20-day EMA 
• RES 1: 1.2322 High Jan 10 
• PRICE: 1.2231@ 19:58 GMT Jan 15
• SUP 1: 1.2100 Low Jan 10 
• SUP 2: 1.2087 0.764 proj of the Sep 26 - Nov 22 - Dec 6 price swing
• SUP 3: 1.2037 Low Oct 4 ‘23 and a key support 
• SUP 4: 1.2000 Psychological round number      

The trend condition in GBPUSD remains bearish and the pair is trading closer to its recent lows. Recent weakness has confirmed a resumption of the downtrend and marks an extension of the price sequence of lower lows and lower highs. Note too that moving average studies are in a bear-mode position, highlighting a dominant bear trend. Sights are on 1.2087 next, a Fibonacci projection. Initial firm resistance is at 1.2433, the 20-day EMA.