SPEAKER_01 0:00

Imagine stepping into a boardroom, right? And the new boss has to make his very first critical decision, but the old boss is sitting right next to him, just watching every single move.

SPEAKER_00 0:10

Yeah, it sounds like a movie, but that's well, that's exactly what's happening in the Federal Reserve next week. It's an 80-year anomaly.

SPEAKER_01 0:16

Exactly. Welcome to today's deep dive. We're unpacking the June 5 pre-market briefing from Eli Levy at Canon Trading Company. You can reach him at Eli at Canon Trading.com, by the way.

SPEAKER_00 0:27

And today we're really navigating a market that's caught in this massive tug of war. I mean, we have a slightly cooling domestic labor sector on one side, and then just looming on the other, violent energy volatility.

SPEAKER_01 0:40

Right. But before we pull all those pieces apart for you and figure out what it means for your portfolio, we don't need to get through a quick required disclosure.

SPEAKER_00 0:47

Disclaimer: Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

SPEAKER_01 1:16

Okay, so with that out of the way, let's start with that cooling labor sector you mentioned. We saw weekly jobless claims hit 225,000 right now.

SPEAKER_00 1:24

Yeah, exactly. Which is the highest we've seen since February. And that actually softened the 10-year treasury yield down to 4.47%.

SPEAKER_01 1:31

Okay, let's unpack this for a second because does a bump of just what 13,000 claims really mean the broader economy is slamming on the brakes, or is this just a minor blip?

SPEAKER_00 1:40

Well, the trading floors are intensely divided on that. I mean, if you look at the CME FedWatch tool, the market is only pricing in a 36% probability of a rate cut at the mid-June meeting.

SPEAKER_01 1:49

Wow, only 36%.

SPEAKER_00 1:50

Right. But the real friction isn't just the data itself, it's the dynamic inside the Fed room that we talked about at the top.

SPEAKER_01 1:57

Oh, right, because new Fed chair Kevin Walsh is presiding over his very first meeting, sitting literally alongside former chair Powell.

SPEAKER_00 2:05

Exactly. Powell remained on the committee as a governor. And we haven't seen a sitting and former chair on the same FOMC in nearly 80 years. That is wild. It is. And here's why that actually matters for markets it raises the risk of voting factions. Like, does Powell's legacy presence intimidate Walsh?

SPEAKER_01 2:25

Yeah. Or does it create a split consensus?

SPEAKER_00 2:28

Exactly. When you have, you know, ambiguous labor data, a divided room just makes the Fed's next move incredibly difficult to predict.

SPEAKER_01 2:35

And they aren't making these decisions in a vacuum either, because that uncertainty at the Fed is colliding with the ultimate driver of global inflation, which is energy.

SPEAKER_00 2:43

Oh, absolutely. WTI crude slipped to $95 a barrel recently. But Goldman Sachs and JP Morgan, they are explicitly warning of extreme volatility ahead of tomorrow's OPEC Plus meeting.

SPEAKER_01 2:54

Yeah, the market feels like it's just holding its breath in the eye of a hurricane right now.

SPEAKER_00 2:58

That's a good way to put it. I mean, the stakes for OPEC plus are immense. They previously agreed to a $188,000 barrel per day production hike for June.

SPEAKER_01 3:08

Right. So the market is watching to see if geopolitical headline risks force them to pause that hike. But wait, if they do pause the hike, how does that actually impact the broader market?

SPEAKER_00 3:20

Well, if they pause that 188,000 barrel hike, they are essentially admitting out loud that global consumers are just too weak to absorb even a tiny increase in supply.

SPEAKER_01 3:29

Oh, wow.

SPEAKER_00 3:30

Yeah, it immediately changes the narrative from, you know, we are managing oil prices to we are panicking over a global recession.

SPEAKER_01 3:37

Aaron Powell And that looming energy volatility doesn't just stay in the oil markets, does it? I mean, it acts like a wrecking ball across the entire commodities complex.

SPEAKER_00 3:45

It really does. Which explains the wild, fragmented contrasts we are seeing elsewhere.

SPEAKER_01 3:49

Aaron Powell Right, like how favoral weather has absolutely crushed grains and a record Brazilian crop forecast has totally tanked coffee. But wait, if grains are getting crushed, shouldn't cheaper feed mean cheaper cattle?

SPEAKER_00 4:01

You would think so.

SPEAKER_01 4:02

So why is live cattle defying that trend and hitting all-time highs?

SPEAKER_00 4:07

It does seem counterintuitive, right? But cheap feed doesn't matter if the herds simply aren't there. We are looking at historically tight physical supply right now. Yeah. But to really understand these localized commodity moves, we have to look at the global scoreboard, which is the US dollar. The DXY is sitting at 99.54.

SPEAKER_01 4:27

Aaron Powell It's acting like a massive gravitational pull right now.

SPEAKER_00 4:30

That's the perfect way to look at it. High U.S. interest rates combined with, you know, safe haven flows from those geopolitical risks, it creates a vortex. Sucking everything in. Exactly. The higher U.S. rates go, the more global capital gets sucked away from other economies.

SPEAKER_01 4:45

Leaving currencies like the yen in an absolute free fall.

SPEAKER_00 4:49

Yes. And that strong dollar has pushed the yen dangerously close to the 160 line. That's the exact intervention threshold that triggered massive emergency action from Japan's Ministry of Finance earlier this spring.

SPEAKER_01 5:02

Wow. It's such a fragile ecosystem where one central bank's policy just aggressively strains another.

SPEAKER_00 5:08

It really is. So as you look at your own trading thesis this week, here is a final provocative thought to chew on.

SPEAKER_01 5:15

Let's hear it.

SPEAKER_00 5:16

In a landscape currently dominated by massive geopolitical headline risks and energy-driven inflation pulses, are traditional domestic indicators like jobless claims losing their power to predict what the Fed will actually do.

SPEAKER_01 5:30

That is a great question to leave you all with. Huge thanks to Eli Levy from Canon Trading Company for the phenomenal source material today.

SPEAKER_00 5:36

Yeah, fantastic insights.

SPEAKER_01 5:38

Once again, you can reach them at Eli at CanonTrading.com. And to wrap up, disclaimer trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.