EUROZONE ISSUANCE: EGB Supply (2/2)

Our preview of the April FOMC meeting minutes (out May 20 at 2pm ET) : Download Full Report Here

The minutes should shed further light on the Committee’s discussion about changing its rate guidance, with inter-meeting commentary emphasizing rising risks to the inflation side of the dual mandate as potentially necessitating a change of approach. MNI’s review of the April FOMC meeting.

• MNI’s Hawk-Dove spectrum has shifted in a more hawkish direction since the April FOMC. While the meeting Statement didn't remove the easing bias (“considering the extent and timing of additional adjustments”) in favor of a more two-sided outlook on rates, three of the four voting regional Fed presidents (Hammack, Kashkari, and Logan) dissented, noting they "did not support inclusion of an easing bias in the statement at this time".
• The minutes of the last two FOMCs have seen a rising number of participants favor 2-sided guidance, rising in March to "some" (5 or so) from "several" (4 or so) in January; we would be unsurprised if this number rose to perhaps 6 or 7 at this meeting given Powell's characterization in the post-meeting press conference ("we had quite a vigorous discussion about .. the guidance and is it still appropriate and that kind of thing. I would say the number of people on the Committee who either could support that language change, changing to a more neutral stance so that a hike is likely as a cut, that number has increased over the intermeeting period.“)
• That plausibly sets it up for 3-4 more members and thus a majority supporting an end to the easing bias by the next meeting in June, though it remains to be seen whether such a contingent on the 19-member FOMC would also constitute a majority on the (currently) more dovish 12-member voting group.
• A guidance shift wouldn't rule out future rate cuts, but it would certainly indicate the Committee has gotten more agnostic on the matter, and could set up a contentious first meeting for new chair Kevin Warsh.
• Reserve Management Policy Shift: Elsewhere, we will be interested to see whether there was discussion over reserve management purchase strategy, in light of the May 13 announcement that there will only be $10B in bill buys in the coming month, well below $25B last month and $40B from the prior 4 months that kicked off the reserve purchases, and at the low end of expectations that we'd seen which had largely been for a $5B to $10B reduction to $15B - $20B/month.

• RES 4: 1.3658 High May 1 and a key resistance   
• RES 3: 1.3551 High May 13 
• RES 2: 1.3470 50-day EMA
• RES 1: 1.3463 High May 20
• PRICE: 1.3452 @ 16:47 BST May 20
• SUP 1: 1.3303 Low May 18
• SUP 2: 1.3277 76.4% retracement of the Mar 31 - May 1 bull leg
• SUP 3: 1.3212 Low Apr 7
• SUP 4: 1.3159 Low Mar 31 and a key support

A S/T bearish theme in GBPUSD remains intact and the latest recovery appears corrective - for now. However, note that the rally on Monday appears to be a bullish engulfing candle - a reversal signal. A move through initial resistance at 1.3450, the May 18 high, would strengthen this pattern and suggest scope for a stronger bull cycle. Key short-term support lies at 1.3303, the May 18 low. A break would confirm a resumption of the recent bear leg.    

RRP usage climbs to $24,867B with 16 counterparties this afternoon vs. $12.911B Tuesday. Compares to last year's highest excess liquidity measure: $460.731B on June 30.