NBP: Governor Says Rates Could Be Cut To Minimal Possible Levels

• RES 4: 6124.00 High Feb 24     
• RES 3: 6080.75 High Feb 26  
• RES 2: 6057.00 High Mar 3
• RES 1: 6008.00 High May 29 
• PRICE: 5950.00 @ 03:06 BST Jun 3  
• SUP 1: 5836.99/5756.81 20- and 50-day EMA values
• SUP 2: 5596.00 Low May 7  
• SUP 3: 5455.50 Low Apr 30
• SUP 4: 5355.25 Low Apr 24 

The trend condition in S&P E-Minis is unchanged and remains bullish. Recent gains delivered a print above 5993.50, the May 20 high and a bull trigger. The break highlights a resumption of the uptrend and maintains a price sequence of higher highs and higher lows. 6000.00 has been pierced, an extension would open 6057.00 next, the Mar 3 high. Key support lies at 5756.81, the 50-day EMA. A clear break of this average is required to highlight a reversal.

While today’s GBP STIR moves have generally been shaped by moves further out the curve, the latest BoE TSC hearing proved more interesting than usual.

• Key findings from that event included:
• Deputy Governor Breeden positioning herself as a little more dovish than Governor Bailey.
• Governor Bailey seemingly pointing to a move away from using market-based rate paths in projections at some stage, albeit with plenty of work to do on this front.
• General support for the improvements made to the Bank’s models and scenario analysis.
• BoE-dated OIS now sits little changed to ~4bp more dovish on the day across the next 8 meetings, with ~40.5bp of cuts priced through year-end.
• 13.5bp of cuts are priced through August, with 18.5bp showing through September and 33bp through November.
• SONIA futures are little changed to +5.0. Proxy terminal policy rate pricing stands at 3.575% after briefly printing 3.775% back on May 21.
• Final services and composite PMI data headlines the UK calendar on Wednesday, expect macro cues to dominate between now and then.

• After being among the best performing currencies on Monday, the likes of AUD and NZD have given up a solid portion of those advances today, as the relief rally for the greenback extends, and weighs on antipodean FX. For AUDUSD, that’s another test/rejection of the 0.6500 handle, a level spot has been unable to close above this year despite several tests of the psychological mark.
• We noted yesterday that while Westpac believe the outlook still favours an appreciation profile for AUDUSD, they envisage a choppy, low- intensity grind with the USD doing most of the leg work. Key support lies at 0.6389, the 50-day EMA.
• The RBA minutes highlighted that not only is there considerable uncertainty regarding the outlook but that the Board prefers to remain cautious and move “predictably”. The release had little market impact overnight, which turns the attention towards final PMIs and Q1 GDP data due tomorrow.
• Growth is expected to come in at a marginally slower pace of +0.4% Q/q, down from a prior reading of 0.6%. Household spending indicators suggest demand has stalled in the first quarter, after consumers took advantage of Black Friday deals at the tail end of 2024. Expectations are for the annual figure to rise to 1.5%, up from 1.3% in Q4.