STIR: Year-end Fed Funds Implied Rates 3bps More Dovish With Tariffs Imposed
Year-end Fed funds implied rates are ~3bps more dovish than yesterday’s close, with 105bps of easing now priced through the December meeting (vs ~102bps yesterday; vs an assumed 4.33% effective). Pricing for upcoming meetings is steadier, with 14bps of cuts priced through May, 39bps through June and 63bps through July.
- Although Fed Chair Powell said on last Friday that FOMC is “well positioned to wait for greater clarity before considering any adjustments to our policy stance”, the impact of the US tariff announcement on markets (e.g. tighter/stressed Treasury market conditions) and economic activity may yet prompt a more dovish stance in upcoming meetings than previously signalled.
- The SOFR strip has twist steepened, with whites +2.0 to +4.0 ticks and blues -5.5 to -6.0 ticks. The long-end has been dragged lower by US Treasuries (details of which were highlighted in an earlier post).
- Fed’s Barkin is scheduled to speak at 1600GMT/1100EST, with the FOMC’s March meeting minutes set to follow at 1900GMT/1400EST (although these minutes are largely stale given the latest developments in US trade policies and the associated market fallout).
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AUDUSD TECHS: Bullish Outlook
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6364 High Mar 6
- PRICE: 0.6318 @ 07:42 GMT Mar 10
- SUP 1: 0.6282/6187 Low Mar 7 / 4
- SUP 2: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 3: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 4: 0.6000 Round number support
AUDUSD traded higher last week. The pair has breached both the 20- and 50-day EMAs, and a stronger recovery would undermine a recent bearish theme and expose key short-term resistance at 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen a bull cycle. On the downside, a move below 0.6187, the Mar 4 low, is required to reinstate a bear threat and open the bear trigger at 0.6088, the Feb 3 low.
STIR: BoE Pricing Continues To Show ~55bp Of Cuts Through Dec
GBP STIRs little changed vs. late Friday levels.
- BoE-dated OIS flat to 1bp more dovish across ’25 meetings, showing 20bp of cuts through May, 26bp through June and 54.5bp through year-end. We still look for a cut in May at this stage.
- SONIA futures flat to +3.5.
- The latest KPMG-REC report on jobs provided another warning sign when it comes to the health of the UK labour market.
- Permanent salary growth posted its lowest seasonally adjusted reading for four years, with "weaker demand for staff, improved candidate numbers and tighter budgets" all cited as reasons. Hiring continued to decline, albeit at a slower pace than in January with "recruiters frequently commenting that redundancies had expanded the pool of available workers."
- That helps explain some of the cross-market outperfromance vs. EUR STIRs.
- Friday’s monthly economic activity data headlines this week’s UK calendar, with the latest BoE/Ipsos inflation attitudes survey also due to be released on the same day.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.455 | -0.1 |
May-25 | 4.259 | -19.7 |
Jun-25 | 4.194 | -26.2 |
Aug-25 | 4.056 | -40.0 |
Sep-25 | 4.021 | -43.5 |
Nov-25 | 3.930 | -52.6 |
Dec-25 | 3.912 | -54.4 |
NORWAY: Broad-based Strength In February CPI Report; March Cut Now A Closer Call
Norwegian CPI-ATE inflation momentum (3m/3m seasonally adjusted annualised rate using Stats Norway data) accelerated to 4.03% in February, up from 3.51% in January and 3.10% in December. It’s the fourth consecutive acceleration, coming at a time when Norges Bank is gearing up to begin its easing cycle. Nordea have removed their call for a March cut following the data.
- Sequential SA CPI-ATE prices rose 0.61% M/M, the firmest reading since October 2023. On an NSA basis, prices rose 0.99% M/M (vs 0.5% cons).
- Annual CPI-ATE inflation was 3.43% Y/Y (vs 2.9% cons, 2.7% Norges, 2.82% prior).
- Services inflation accelerated to 4.04% Y/Y (vs 3.19% prior), driven by ex-rent categories (3.77% vs 3.36% prior). Rents also ticked up to 4.25% (vs 4.18% prior). Statistics Norway notes that restaurants, communications and some transport services were important drivers here. Air travel can often be volatile, while boat fares were sharply higher on a base effect (prices fell 18.8% M/M last February due to a government policy). As such, there may be some reversal next month.
- Food prices were also seasonably strong, rising 7.49% Y/Y (vs 4.96% prior). Similar upside in food prices was likely seen in Sweden in February.
- Meanwhile, imported goods remain well-above Norges Bank projections at 1.11% (0.3% Norges, 1.21% prior).
- Headline inflation was 3.55% Y/Y (vs 2.6% cons and Norges, 2.35% prior). Base effects saw electricity inflation at 7.1% Y/Y.
