The Daily Fix – Holding in for Nvidia’s earnings

• Fed member Waller offers a timeline for Fed rate cuts
• US swaps imply a September cut from the Fed at 75%
• New closing highs in the S&P500, Tesla looking constructive 
• Nvidia in the spotlight – can they blow the lights out?
• The RBNZ meeting and UK CPI a risk for FX traders 

Waller’s comments suggest he saw the 0.29% m/m April core CPI read as constructive, and with anticipation of a 0.3% m/m on core PCE inflation (due 31 May) if we were to get a print that rounds down to 0.2% then the possibility of a September rate cut should become almost fully priced. 

While the Fed sets policy to PCE inflation, if we use CPI inflation as our guide, then the next CPI print is due on 12 June, with the following reads on 11 July and 14 August - so essentially that takes us to what many would see as a highly politicized rate cut. Certainly, Trump will be making that call liberally. 

US Treasury yields are modestly lower on the day (US2yr -2bp, 10yr -3bp), with US interest rate markets pricing 19bp of cuts (or a 75% chance) for the September FOMC meeting – so the markets are heavily leaning on the first cut to play out in the final Fed meeting before the US election. 

As Waller also detailed, he doesn’t see sense in just one cut. As such, we look at forward interest pricing and see 42bp (or just under two) of cuts priced by year-end and three 25bp cuts over the coming 12 months. The market prices the fed funds neutral rate – or the future interest rate which is neither stimulatory nor restrictive with inflation close to target - at 3.81%, suggesting we could see five 25bp cuts in total through the cycle.  

S&P500 closed at a new closing high, and while broad activity was light – S&P500 volumes were 14% below the 30-day average, we saw a positive intraday trend, with the cash index opening on its low and closing on the session high at 5321. Utilities and staples were leaders of the sector pack, so a rally at an index level was driven by defensive names, with energy impacted by a 0.7% fall in US crude. Nvidia’s 1Q25 earnings perhaps held traders back from taking on excessive risk, although we saw solid flows in Tesla (+6.7%), and technical set-up suggests upside momentum could be building here, at least for a near-term move into $206.77 (to close the gap from 24 Jan). 

Nvidia remains the focal point though, with the options market now pricing a -/+7.9% move aftermarket in the session ahead. The market will see what it wants to see, and while the initial move in price (likely 06:20 AEST) will likely come on the outcome of Q1 sales (notably in data centres), and gross margins, as well as its guidance for Q225 - where they will need to be by some measure - it’s the guidance on the earnings landscape and product rollout (notably on Blackwell) from CEO Jensen Huang that could dictate if the market really wants to push this one along for a more sustained period.

For the Asia equity open, S&P500 futures sit 0.2% higher from where we closed in the various cash equity markets yesterday, so this will lend support. The ASX200 will follow that S&P500 futures lead, with our opening call conveniently sitting up 0.2% higher at 7868, with BHP’s ADR suggesting the stock opens at $46.23 +19c, helped to an extent by Dalian iron ore futures sitting +2.5%. The HK50 index attracted good selling flow on the open yesterday, with a 2% intraday decline, but stabilised as the session wore on and we see a flat open ahead – there doesn’t seem to be any glaring catalysts for traders to expect another big move, but portfolio flows will dictate that, and having an open mind to react to price action will always serve you well when trading the HK50. 

We see a flat open in Japan, and I favour buying into strength here, where a push through 39,350 would reestablish the short-term bull trend. 

We’ve seen tight moves in gold (-0.5%), silver (+0.5%) and copper+0.5%), as is true in FX markets, with the AUDUSD, EURUSD, and NZDUSD unchanged on a close-to-close percentage basis. The near-term risk today is the RBNZ meeting (at 12:00 AEST), and while the bank won’t move the cash rate, with the rates market pricing an 80% chance we see a 25bp rate cut in the October RBNZ meeting and 70bp of cuts by Feb 2025, the policy statement will need to offer the market belief that this pricing is indeed correct, or we could see some modest volatility in the NZD. 

GBPUSD also get close focus with the pair just currently holding above 1.2700 and delicately poised. EURGBP remains heavy as it eyes range lows at 0.8530 and could get good attention from traders with UK CPI due out at 16:00 AEST / 09:00 UK time. We should see a further moderation to 3.6% in core CPI (from 4.2%) and to 2.1% in headline CPI, and with UK swaps pricing a 25bp cut in the June BoE meeting at 50% - this could really skew the argument for a cut or hold. EU PMI data due tomorrow will then offer this trade further legs. 

In the US in the session ahead we get US existing home sales and FOMC minutes, although neither should be overly market moving and I’d have few concerns with holding equity, gold, or USD exposures over either event. We also hear from Fed member Goolsbee and Bostic, but again I can't see comments here moving the dial ahead of Nvidia’s numbers.