The FOMC July meeting might see a vigorous family fight between the hawks and centrists. But in the end, Warsh might prevail for a hold yet the FOMC statement might be hawkish. To neutralise the FOMC statement’s hawkishness, Warsh’s press conference might leave enough dovish hints on June favorable CPI prints, low wage inflation & stable market indicators of long-term inflation expectations. From a market perspective, our 1yr-1yr US SOFR 1st half risk risk is received at 4.15 and another half risk waiting to get received at 4.25. This week’s high was 4.23 before it cooled down to close at 4.20. We have a profit target of 3.9 and stop loss at 4.4 for this trade. On the FX side, we continue to believe in DXY strength at least till Sep and continue to see JPY and GBP most weak against DXY. This has played out well till now as JPY is now nearing almost 164 levels & GBP is underperforming G-7 FX due to fiscal worries as well.
