COMMODITIES: Medium-Term Trend Signals for Gold Remain Bullish

• Danske Bank are the latest analysts we’ve seen push back the timing of the next Fed rate cut.
• However, it is fiscal-led rather than being driven by latest week’s de-escalation in US-China trade policies.  
• “The budget reconciliation bill contains even more front-loaded stimulus support than we expected. The US fiscal policy stance could turn expansionary from Q1 2026 after only a brief tariff-driven tightening in Q2-Q4 2025. Budget deficits could reach 7.0% of GDP in 2026-2027.”
• They look for a next cut in September (from June previously) but maintain their terminal rate view at 3.00-3.25%, reached in Sep 2026 vs Jun 2026 previously.
• Their EUR/USD call is unchanged with a target of 1.20. “The USD has become increasingly insensitive to Fed repricing in recent months, and we believe macro and structural drivers are now more decisive for the pair’s trajectory.”
• Last week saw TD Securities delay their call for a next cut to October (from July) whilst lifting the terminal to 2.75-3.00% by 4Q26 from 2.25-2.50% previously. Barclays and JPMorgan meanwhile pushed back their next rate cut call to December from July and September respectively, with both eyeing a terminal 3.25-3.50%. 

• Spread set: 4.25% Dec-55 gilt (GB00BT7J0241) + 1.75bp (guidance was 1.75bp/2.25bp)
• Size: GBP benchmark (MNI expects GBP5.5-8.5bln)
• Books in excess of GBP70bln (inc JLM interest of GBP3.75bln)
• ISIN: GB00BT7J0241
• JLMs: BNP Paribas, BofA Securities, Deutsche Bank, Goldman Sachs International Bank (B&D / DM) and Santander
• Settlement: 21 May 2025 (T+1)
• Maturity: 31 January 2056
• Coupon: 5.375%. Short first
• Timing: Books to close at 10:00BST (as MNI expected)

From market source / MNI colour

Pill is now starting the Q&A.

• He went off script a bit on the welfare losses based on real income resistances (based on policymakers' beliefs vs true levels) and went into quite a bit more detail than the prepared text discusses.
• He argues that there are two-sided risks to assuming real income resistance is either too high or too low. And that there is no general result to be either too worried or not worried enough about intrinsic inflation.