US: FED Reverse Repo Operation

Released yesterday, the IFO's May Employment Barometer rose to the highest reading since July 2024, at 95.2 points from 94.0 in April. “The labor market is showing initial signs of stabilizing [...] “Whether this turns into a real trend reversal depends largely on further economic developments.”, IFO comments.

• "In industry, the barometer rose for the fifth consecutive month. Overall, however, the majority of companies are continuing to cut jobs. By contrast, service providers are slightly increasing their headcount, with cautious optimism emerging particularly in the temporary employment sector. In the retail sector, however, job cuts continue to predominate. Most companies in the construction industry are also still planning to have fewer employees, although the number of job cuts is also decreasing here."
• A slowing of the deterioration in German labour market conditions was also observed in the hard data recently (see the bottom chart for contributions of quarterly employment growth), with that milder deterioration most notable in sectors other than public services, education and healthcare.
• Monthly German labour data will be released tomorrow - consensus is for unemployment to have ticked up by 12k in May (vs 4k April) and the u/e rate to remain unchanged at 6.3%.

• RES 4: 1.3913 High Sep 14 2021
• RES 3: 1.3681 1.500 proj of the Feb 28 - Apr 3 - 7 price swing
• RES 2: 1.3605 1.382 proj of the Feb 28 - Apr 3 - 7 price swing
• RES 1: 1.3593 High May 26 
• PRICE: 1.3500 @ 16:57 BST May 27
• SUP 1: 1.3444/3351 High Apr 28 and 29 / 20-day EMA   
• SUP 2: 1.3189/40 50-day EMA / Low May 12 and key support
• SUP 3: 1.3041 Low Apr 14  
• SUP 4: 1.2968 Low Apr 11 

The trend needle in GBPUSD continues to point north and the pair traded higher Monday, starting the week on a bullish note. The bull trigger at 1.3444, the Apr 28 / 29 high, has been cleared. The break confirms a resumption of the uptrend and sights are on 1.3605, a Fibonacci retracement. Medium-term trend signals highlight a dominant uptrend - moving average studies remain in a bull-mode position. First support lies at 1.3351, the 20-day EMA.   

Takeup of the Fed's overnight reverse repo facility fell $16.7B to $138.1B Tuesday, in the return from the Memorial Day weekend. 

• That's the lowest level since May 20, with the pullback in facility usage since the start of last week ($180B high) potentially reflecting a pullback of GSE cash from markets.
• Takeup is next expected to rise at the end of the week, reflecting end-month dynamics.