FED: Kugler Sees Important Upside Risks To Inflation

Call volume picked up heading into midday, implied vol softer on moderate straddle & strangle selling. Projected rate cuts through mid-2025 gain slightly vs. this morning's levels (*) as follows: Mar'25 at -4.2bp (-4.1bp), May'25 at -11.9bp (-11.2bp), Jun'25 at -22.7bp (-22.1bp), Jul'25 at -29.1bp (-28.6bp).

• +5,000 0QJ5 95.62/95.87/96.00 put trees, 0.5 ref 96.185
• -4,000 0QH5 96.31 calls, 8.0 ref 96.155/0.36%
• +4,000 0QH5 96.06/96.31 1x2 call spds, 3.0 ref 96.16
• +10,000 0QH5 97.00/3QH5 96.87 call spds, cab net steepener
• +20,000 0QU5 97.12/98.12 call spds, 6.5 ref 96.15
• +10,000 SFRU5 96.62/97.62 call spds, 5.75 ref 96.015
• -5,000 SFRM5 95.87/96.12 call spds, 6.75 vs. 95.915/0.54%
• +10,000 SFRZ5 95.75/96.00 put spds vs. 5,000 96.50 calls, 1.75 net
• -4,000 SFRN5 95.62/96.37 strangles, 13.0 ref 96.035
• +5,000 SFRZ5 94.87/95.12/95.37/95.62 put condors, 2.25 ref 96.125

• Mixed performance for the Euro against G10 peers on Wednesday, as softer US ISM Services prompts some EURUSD strength, however, the significant yen outperformance has weighed heavily on EURJPY (-1.00%), with price action supported by overnight Japanese wage figures.
• While single currency sentiment continues to be impacted by Eurozone growth concerns, there will be some attention on the 'core' figure of German factory orders on Thursday to provide the latest update. However, the data is unlikely to alter the narrative of industrial weakness, which appears well factored in at this juncture.
• More importantly, the Bank of England will headline tomorrow, and we think its Bank Agent's Pay Settlement Survey could provide some signal on policy ahead. EURGBP’s renewed weakness this week will provide some focus on the cross, having pulled further away from trendline resistance in recent weeks.
• Short-term resistance for the cross stands at 0.8363/69, the Jan 3 high / 20-day EMA, while initial support would be located at 0.8248, Monday’s low. Below here, the key 2022 low at 0.8203 comes back into focus, the weakest point of a multi-year range.

• US TSY TO SELL $42.000 BLN 10Y NOTES FEB 12, SETTLE FEB 18