FED: Pre-Minutes FOMC Communications: Doves Lean Increasingly Cautious (2/3)
Feb-19 16:36
Chair Powell’s semi-annual Congressional testimony more or less repeated the themes of the January FOMC meeting press conference – sometimes verbatim (“we do not need to be in a hurry to adjust our policy stance”) – and he sounded cautiously optimistic on inflation even after the January print (“I would say we're close, but not there on inflation.”) But he sounded more hawkish on the labor market front after January's employment data, telling the Senate Banking Committee that the labor market was "very strong".
- Powell is among the more dovish members of the Committee at this point, but it’s worth noting that the other prominent dovish-leaning members have taken a more cautious tone as well.
- NY Fed President Williams called policy “modestly” restrictive, a term that has been used by hawks and could be considered less dovish vs his previous commentary in mid-January ("somewhat restrictive”).
- Chicago's Goolsbee, a 2025 voter, said that despite his view that called January's CPI data "sobering" and said "there’s no question, if we got multiple months like this, then the job is clearly not done” Gov Kugler: "the prudent step is to hold the federal funds rate where it is for some time" VC Jefferson noted “I do not think we need to be in a hurry to change our stance”.
- Gov Waller called January's CPI "mildly disappointing...the data are not supporting a reduction in the policy rate at this time…if this wintertime lull in progress is temporary, as it was last year, then further policy easing will be appropriate. But until that is clear, I favor holding the policy rate steady."
- Boston's Collins (notably, pre-jobs and inflation data): "it's really appropriate for policy to be patient, careful, and there's no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we're still somewhat restrictive… what I would say is, again, there is more to do".
- And SF's Daly "At this point, policy needs to remain restrictive until, from my vantage point, until I see that we are really continuing to make progress on inflation.”
- Philadelphia's Harker took a longer-run view: "While I won't commit to a specific timetable, I remain optimistic that inflation will continue a downward path and the policy rate will be able to decline over the long run".
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ECB: /SWAPS: ECB Survey Highlights Deteriorating Market Liquidity In Autumn 2024
Jan-20 16:29
The ECB’s December 2024 SESFOD survey (Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets) reports a tightening in credit terms and conditions between September and November 2024 “as general market liquidity deteriorated”.
- “A small net percentage of survey respondents expected overall terms to tighten further across all counterparty types in the three months ahead (i.e. in the period from December 2024 to February 2025)”.
- “A significant net percentage of survey respondents reported that financing rates/spreads had increased for funding secured against all collateral types”.
- “Survey respondents also reported increased demand for funding across all collateral types. Moreover, they reported a slight deterioration in the liquidity and functioning of collateral markets”.
- A reminder that German paper saw a notable cheapening against swaps through the Autumn, with the Bund ASW (vs 3-month Euribor) tightening from over 25bps at the end of September to below 0bps by mid-November (an all-time/cycle low).
- Despite retracing a portion of those moves in the second half of November, long-end spreads have re-approached those record levels this month. Analysts have highlighted increased free-float from ECB balance sheet run-off and heavy sovereign supply as fundamental drivers of swap spread narrowing in 2025.
- Press release: https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250120~9384966317.en.html
OPTIONS: Expiries for Jan21 NY cut 1000ET (Source DTCC)
Jan-20 16:18
- EUR/USD: $1.0300(E2.0bln), $1.0325(E3.3bln), $1.0400(E2.2bln), $1.0415-20(E1.3bln), $1.0450(E921mln), $1.0490-00(E1.4bln)
- USD/JPY: Y153.00($1.5bln), Y156.00-05($2.2bln)
- EUR/JPY: Y159.40(E1.3bln), Y166.20($1.2bln)
- AUD/USD: $0.6200(A$775mln), $0.6245-50(A$939mln)
- USD/CAD: C$1.4285($703mln)
UK DATA: MNI UK Labour Market Preview: January 2025 Release
Jan-20 15:56
- The importance of UK labour market data may have fallen a little for the MPC, but it is still incredibly important for the market, despite growth concerns having picked up recently and activity and PMI data increasingly watched.
- The scope for further revisions make this month’s print even more unpredictable.
- Rounded to 1dp, the majority (6/8) of analyst forecasts we have seen for private sector regular AWE look for a 5.8%Y/Y print in the 3months to November, up from 5.37%Y/Y in the 3-months to the end of October. The other two forecasts we have seen look for 5.7%.
- In terms of the “headline” whole economy AWE numbers, ex-bonus forecasts are generally 5.5%Y/Y in the 3-months to November (from 5.19%Y/Y in the 3-months to October) while the total (including bonus) whole economy AWE forecasts are split between 5.6-5.7%Y/Y in the 3-months to November (with one analyst looking for 5.5%).
For the full preview including summaries of a dozen sellside views click here.
