SLOVAKIA: Fico Clashes w/EU Parl't Committee & Germany's Merz On Funds & RoL

• Last week saw a number of MPC speakers but we didn’t hear an awful lot in terms of their views of policy ahead. Most stuck to the script of tariffs being negative for growth but that the impact on inflation was unclear. The only exception was Greene who initially communicated this line but when pushed said that she thought tariffs could be more deflationary.
• Given the number of MPC members who spoke, we think there is strong view that this was a coordinated policy communication (or indeed lack of). This leaves options open for the May MPC meeting which will be accompanied by an MPR and press conference.
• Looking ahead to that meeting, there are three strands of communication that underpin the Bank’s forward guidance. First that monetary policy needs to “remain restrictive” – we think it would be unlikely to see this wording is removed when there is still so much uncertainty about where prices will go in the next couple of CPI prints. These prints are significant as a number of service firms in particular reset their prices around April / May – and with employer NICs increasing there is an even greater uncertainty than usual. “Restrictive” will have to go at some point, but we think that is more likely to be a language change in either June or August.

• RES 4: 113-04   76.4% retracement of the Apr 7 - 11 bear leg 
• RES 3: 112-12   61.8% retracement of the Apr 7 - 11 bear leg
• RES 2: 111-25   50.0% retracement of the Apr 7 - 11 bear leg   
• RES 1: 111-22+ High Apr 25
• PRICE:‌‌ 111-15+ @ 11:21 BST Apr 28 
• SUP 1: 110-16+/109-08 Low Apr 22 / 11 and the bear trigger 
• SUP 2: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
• SUP 3: 108-21   Low Feb 19
• SUP 4: 108-03+ Low Dec 12 ‘24 and a key support 

Treasury futures are trading closer to their recent highs. Recent gains are considered corrective and resistance to watch is 111-25, 50.0% of the Apr 7 - 11 bear leg sell-off. Clearance of this level would undermine the bearish theme, and open 112.12, the 61.8% retracement point. On the downside, a resumption of weakness would refocus attention on 109-08, the Apr 11 low and the bear trigger. Clearance of this level would resume the downtrend.

• Fed Funds implied rates are 1-3bp higher from Friday’s close for 2025 meetings amidst broader downward pressure on fixed income.
• It’s a mild paring of the rally seen in the second of last week that continued right up to the weekend.
• The rate path is accordingly firmly within last week’s range with a next Fed cut more than fully priced for the July meeting.  
• Cumulative cuts from 4.33% effective: 2bp for next week, 16bp Jun, 35.5bp Jul, 55.5bp Sep and 86.5bp Dec.
• The SOFR implied yield of 3.14% (SFRU6, +2.5bp) remains at familiar levels, still ~25bp lower than pre Apr 2 Liberation Day levels.
• The FOMC is in media blackout ahead of the May 6-7 meeting.
• In case missed late on Friday, Kevin Warsh (frontrunner for the next Fed Chair) said the best way for the Fed to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission. He added the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.