FED: Jan FOMC Minutes: Eyeing Inflation Language Change And Tariff Talk
The minutes to the January 28-29 FOMC meeting (due out 1400ET/1900GMT Wednesday Feb 19) will be scrutinized primarily for three things. (Our review of the January meeting is here.)
- First, why did the Fed decide to remove the Statement language that said inflation "has made progress toward the Committee's 2 percent objective", while retaining the more worrisome clause "remains somewhat elevated"? Chair Powell said that the FOMC wasn't intending to send a signal with this, but we wonder whether there was a substantive discussion about a disappointing lack of disinflationary progress since the easing cycle began in September.
- Second, and related, was there any discussion of a scenario in which the FOMC's next move could be a hike rather than a cut? It's probably too early for such talk to appear in the official minutes, but we have seen small hints of this shift in opinion from FOMC hawks' commentary since January.
- Third, was there any further discussion or analysis regarding the potential impact of the new presidential administration's policy shifts? Powell said that "we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be", but even so, we will be attentive to any broad strokes with which FOMC participants are thinking about these matters (are tariffs seen as inflationary/ stagflationary/ neither?).
- Outside of immediate policy matters, one longer-term consideration that could come out of these minutes is whether there are any details around the framework review launched at this meeting.
- MNI's full Minutes preview, including a wrap-up of all FOMC participants' communications since the January meeting and our Hawk-Dove Spectrum, will be published on Tuesday Feb 18.
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US TSYS: Late SOFR/Treasury Option Roundup
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
EURUSD TECHS: Resistance Remains Intact
- 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.
GBPUSD TECHS: Trend Outlook Remains Bearish
- 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.
