Run hot with Fed eases
June 26, 2025
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–Dollar index is at a new low this morning, with a print of 97.00. It’s now at a lower level than when the Fed first started its hiking campaign on March 16, 2022. At that time, DXY was 98.62 and the FF target was raised from 0 to 0.25-0.50%. By September the high was 114.78. The low at the start of 2021 was 89.21.
–Yesterday’s session in rates was somewhat quiet, with strength in the front end of the curve. Strongest SOFR contracts were SFRU5 and Z5, both +2 on the day to 9597.5 and 9627.0. Deferred contracts were unch’d to +1. Ten year yield was essentially unchanged at 4.29%. Powell was circumspect about the inflationary impact of tariffs in yesterday’s testimony. Tomorrow PCE prices are released, expected 0.1 both headline and Core, with yoy expected 2.3% from 2.1% last and Core 2.6% from 2.5%. Yesterday FFQ5 settled 9573.5 (+1.5). 50/50 odds of an ease at the July meeting would put FFQ5 at 9579.5.
–Things appear to be lining up for a ‘run hot’ economy. NQU5 is building on gains from the last couple of days and is close to making new all-time highs. Last print +92, 22553.
–News today includes Trade Balance, Final Q1 GDP, Jobless Claims expected 243k from 245k last. 7y auction.
