Reading the FOMC: How the Curve Reprices Powell's Last Stand

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Today I went through the full FOMC setup with Jaymes Rosenthal, mapping the SOFR forward curve mechanics, the specific levels in the Z7 contract that determine where bonds, gold, silver, and EURUSD bottom, and how the move index has been decoding the crude-to-inflation transmission through positioning. LIVESTREAM RECORDING FROM TODAY: Today’s Livestream: Main Talking Points1. The Z7 SOFR contract at 96.340 is the single most important level to watch through FOMC and the PCE print. Z7 is pricing twenty five basis points of cuts between now and the end of twenty twenty seven. We are approaching the level that would represent a complete pause through that horizon. If we move there and hold, that caps the downside in bonds, in gold, in silver, and pushes EURUSD higher. The Z7 contract has already made a new low while ZT has not, which means the front end is leading the curve repricing. That divergence is the cleanest signal we have for where the Fed reaction function is heading post-Warsh.2. Interest rates are the asymmetrical linchpin on which the entire economy turns. Everything is a pair trade. When you buy the S&P, you are also fundamentally getting short dollars. Every asset is denominated in a currency, and every currency is priced off short-end interest rates. Recessions are fundamentally about a revaluing of the currency. Once you internalize this, the FOMC meeting stops being about the rate decision and starts being about how the meeting reprices the relative value of every asset against the dollar. That is the framework for trading these meetings, not the binary of cu…