STIR: Next Fed Cut Still Seen In July, Waller Kicks Off Docket
- 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.
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OUTLOOK: Price Signal Summary - USDJPY Trend Structure Remains Bearish
- In FX, EURUSD is trading below Friday’s 1.0630 high. Despite being pierced, resistance at 1.0581, the 20-day EMA, remains intact. A close above this average would highlight a clear breach of it and signal scope for a stronger corrective recovery, towards 1.0710, the 50-day EMA. An extension higher would also allow for an unwinding of the recent oversold condition. The medium-term trend direction is down. The bear trigger is 1.0335, Nov 22 low. Initial support to watch lies at 1.0461, the Dec 2 low.
- GBPUSD traded to a fresh short-term trend high on Friday before fading off highs. Recent gains are considered corrective and this has allowed an oversold trend condition to unwind. The pair has breached the 20-day EMA, signalling scope for a stronger. The next resistance to watch is 1.2836, the 50-day EMA, at 1.2840. The medium-term trend direction is down, the bear trigger is 1.2487, the Nov 22 low. First support lies at 1.2617, the Dec 2 low.
- A bear cycle in USDJPY remains intact. The pair traded to a fresh short-term trend low on Dec 3, highlighting a resumption of the retracement of the Sep 16 - Nov 15 rally. Price has recently traded through the 20- and 50-day EMAs - a bearish development. Sights are on 148.17, the 50.0% retracement of the Sep 16 - Nov 15 bull leg. A reversal higher would refocus attention on the bull trigger at 156.75, Nov 15 high. Initial firm resistance is 151.75, the 20-day EMA.
STIR: Net Long Setting Further Out The Strip Dominated Following NFP Data
OI data suggests that net long setting in SFRH6 through SFRU7 dominated from a positioning standpoint in the wake of Friday’s NFP release, although it was net short cover in SFRZ5 that provided the single largest net positioning swing.
- We will provide greater colour on STIRs and the latest Fed pricing run in an upcoming STIR bullet.
| 06-Dec-24 | 05-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,232,323 | 1,260,057 | -27,734 | Whites | -6,892 |
SFRZ4 | 1,310,083 | 1,297,497 | +12,586 | Reds | +5,002 |
SFRH5 | 1,075,487 | 1,068,155 | +7,332 | Greens | +40,099 |
SFRM5 | 987,585 | 986,661 | +924 | Blues | +8,361 |
SFRU5 | 824,651 | 805,361 | +19,290 |
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SFRZ5 | 896,402 | 922,725 | -26,323 |
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SFRH6 | 560,493 | 555,083 | +5,410 |
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SFRM6 | 605,644 | 599,019 | +6,625 |
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SFRU6 | 642,550 | 632,506 | +10,044 |
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SFRZ6 | 714,210 | 692,399 | +21,811 |
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SFRH7 | 419,262 | 416,715 | +2,547 |
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SFRM7 | 358,155 | 352,458 | +5,697 |
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SFRU7 | 293,220 | 286,526 | +6,694 |
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SFRZ7 | 287,297 | 288,898 | -1,601 |
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SFRH8 | 200,859 | 198,380 | +2,479 |
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SFRM8 | 154,546 | 153,757 | +789 |
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EQUITIES: EU Bank call fly
SX7E (20th Dec) 147.50/150.00/152.50c fly, bought for 0.20 in 6k.
