MNI US MARKETS ANALYSIS - Busy Fedspeak Session

Highlights:

• Greenback slips off highs, providing some relief for major pairs
• BoE MPR forecasts will be harder to interpret when they are "staff" projections
• Potential next Fed chair set to speak on rates later today

US TSYS: TYA Hovers Close To Support, Fedspeak Ahead incl NY Fed's Perli

• Treasuries are little changed overnight, broadly consolidating yesterday’s losses on trade optimism driven risk-on, although having pared some those losses in the front end late yesterday after getting close to 65bp of Fed cuts for 2025.
• Cash yields are 0.5bp lower (2s and 5s) to 1.5bp higher (30s).
• Some long-end weakness follows yesterday’s 30Y tailing by 0.9bps along with the lowest indirect take since 2019 in a proxy for weak foreign demand.
• It helped see a bottoming in 5s30s at ~83bps, currently at 87bps.
• TYM5 trades unchanged at 110-25+ on modest volumes of 270k although that’s still a touch higher than some particularly thin overnight sessions this week.
• It’s close to yesterday’s low of 110-22, initial support before 110-16+ (Apr 22 low). Yesterday’s decline marked an extension of the bear cycle that started at the beginning of May. For bulls, it needs to trade above a key short-term resistance at 112-20+ (May 1 high) to reinstate a bullish theme.
• Data: No notable releases scheduled
• Fedspeak: See STIR bullet for timings of 9 FOMC members. However, for balance sheet considerations, note that NY Fed’s SOMA Manager Roberto Perli is also speaking at 0835ET. 

STIR: Nine (!) Fed Speakers + Potential Next Fed Chair On Today’s Docket

• Fed Funds implied rates have pulled back a little off yesterday’s hawkish extremes following a continued sell-off on the US-UK trade pact, but are still elevated by post reciprocal tariffs standards with levels last sustainably higher in late March.
• Cumulative cuts from 4.33% effective: 5bp Jun, 18bp Jul, 37bp Sep, 52bp Oct and 69bp Dec.
• Today sees a blank data docket but extremely heavy Fedspeak straight out of the media blackout, with just shy of half the FOMC appearing today. It includes five permanent voters and starts earlier than usual with Barr, Kugler and Wiliams speaking at a conference in Reykjavik.
• Powell’s press conference on Wednesday touched on huge uncertainty posed by government policies whilst stressing that policy is well positioned with no hurry to cut rates. Expect a broadly similar tone from many of today’s speakers but with those from either end of the hawk-dove spectrum we watch for how broad-based this no hurry view is along with the balance on risks to inflation vs unemployment.
  • Gov. Barr (voter) – already spoken. Touched on elevated uncertainty from tariffs (which are without modern precedent) but appeared a little more weary of conflicting dual mandate goals than Powell.
  • 0645ET – Kugler (voter) speech on maximum employment (text + Q&A)
  • 0745ET – Kugler follows that with an interview on BBG TV
  • 0830ET – NY Fed’s Williams (voter, dove) gives keynote address in Reykjavik (text + Q&A)
  • 0830ET – Richmond Fed’s Barkin (non-voter) in fireside chat in Virginia (Q&A, both moderated and media)
  • 0915ET – Williams follows earlier speech with interview on BBG TV
  • 1000ET – Goolsbee (’25 voter, dove) opening remarks at Fed Listens event (no text)
  • 1630ET – Williams and Gov. Waller (voter, dove) on panel at Hoover Monetary Policy Conference (text + Q&A). This panel includes Kevin Warsh, seen as a front-runner for the next Fed Chair role when Powell’s term expires in May 2026. He said Apr 25 that the Fed must safeguard its independence by sticking to its core mission.
  • 1945ET – Musalem (’25 voter, hawk), Hammack (non-voter, hawk) and Gov. Cook (voter) on panel at Hoover conference. Text for Musalem and Cook, tbd for Hammack. 

US TSY FUTURES: Mix Of Short Setting & Long Cover Seen Thursday

OI data points to a mix of net short setting (FV, TY & US) and long cover (TU, UXY & WN) during Thursday’s downtick in Tsy futures, with a slight bias towards the former.

• The net short setting in TY futures provided the most meaningful DVO1 equivalent positioning adjustment.

STIR: Net Short Setting & Long Cover Seen Across Most Of SOFR Strip On Thursday

OI data points to a mix of net short setting and long cover in SOFR futures as the strip twist steepened on Thursday.

• The only notable exception came via apparent net long setting in SFRH5.
• Note that instances of net short setting comfortably outweighed pockets of net long cover through the blues. 

FED: Barr Sees Policy In Good Position But May Face Conflicting Dual Mandate

Fed Governor Barr (permanent voter) offers a similar stance to Chair Powell from Wednesday’s press conference, although appears a little more concerned about the prospects of facing conflicting dual mandate goals than Powell who said it’s “not one that we face today.  And we may never face it.  But, you know, we have to be keeping it in our thinking now.” 

Barr's full remarks on "Artificial Intelligence and the Labor Market: A Scenario-Based Approach" can be found here. 

• "Given the economy’s strong starting point and the progress we have made in bringing inflation back toward our 2% objective, monetary policy is in a good position to adjust as conditions unfold”.
• "The size and scope of the recent tariff increases are without modern precedent, we don’t know their final form, and it is too soon to know how they will affect the economy”.
• “I expect tariffs to lead to higher inflation in the United States and lower growth both in the United States and abroad starting later this year. […] In my view, higher tariffs could lead to disruption to global supply chains and create persistent upward pressure on inflation.”
• “I am equally concerned that tariffs will lead to higher unemployment as the economy slows. Thus, the FOMC may be in a difficult position if we were to see both rising inflation and rising unemployment.”
• "Meanwhile, we will also be closely monitoring how technologies like artificial intelligence are being integrated into economic activity and analyzing the implications for how the economy will evolve." 

BTP: Further Tightening In Spreads Unlikely Without EU-US Trade Progress

It may be difficult for the 10-year BTP/Bund spread to see further tightening towards the 100bp handle without meaningful progress on US-EU trade deals. This morning already sees the spread 1bp wider from yesterday’s close at 106bps, despite the relatively supportive risk backdrop. This suggests the risks are skewed towards a retracement of the ~25bp narrowing seen since the April 9 close of 129bps. 

• This week, the EU has announced details of its intended retaliatory measures (totalling E95bln) if a deal with the US is not reached.
• Exports to the US make up ~10% of total Italian exports, so tariffs (even at the current 10% level) will have a direct downward impact on Italian growth, all else equal. Meanwhile, weak demand from other key trading partners (e.g. Germany) will continue to drag. The April manufacturing PMI noted that “new export orders were also down again in April, in part reflective of tariff uncertainty”.
• Although recent fiscal data has been encouraging (the 2024 budget deficit of 3.4% GDP was notably below the Government’s 3.8% projection), weak growth increases the burden on the Government’s revenue/expenditure mix to achieve 2025 deficit and debt to GDP targets.

BOE: MPR forecasts will be harder to interpret when they are "staff" projections

• This change to using staff forecasts rather than trying to come up with an MPC "best collective judgment" is similar to the ECB's forecasting process. There still needs to be sign off from the MPC that the forecasts are broadly appropriate, but the forecasts are potentially less representative of the MPC's views.
• However, the MPC doesn't have one set of views and as we know given the differences of opinions between different MPC members, it was probably made difficult to sign off on forecasts.
• The change does mean that it's harder to interpret the signals from the forecasts as the MPC endorsing or challenging market pricing for example. But it is reasonable to think that there will still be a high degree of input particularly from internal MPC members - in particular Huw Pill the Chief Economist.
• Bailey also notes that the staff come up with the scenarios. Obviously they will be under guidance from the MPC, but this is all part of a bit of loss of control of the forecasts from the MPC and more responsibility for the staff themselves.
• The speech also notes that as we move away from fan charts the "key judgments" will become increasingly valuable - that is something that has been emphasised a lot in recent MPRs.
• It's not quite clear how the May MPR forecasts were formulated - if they were under the new "staff" approach or the MPC's "best collective judgment" approach at this stage.

EUROPE ISSUANCE UPDATE: 

UK DMO Announcement

• The DMO will look to sell up to GBP2.0bln of the 0.125% Jan-28 gilt (ISIN: GB00BMBL1G81) at its programmatic gilt tender next Thursday.

FOREX: Greenback Fades Off Highs, Providing Some Relief

• The USD is modestly softer ahead of the Friday crossover, but is still holding the bulk of yesterday's late rally. EUR/USD has held after a test on the $1.1200 level to the downside overnight, mimicking the price action in GBP/USD which sees a 50 pip bounce off the overnight lows.
• Markets continue to digest a busy Thursday, and are generally concluding that the UK-US trade deal marks the first step toward, rather than a conclusive end to, trade negotiations - meaning any forthcoming US agreements could be struck in a similar vein. Indian and Japanese deals are seen as the next most likely candidates.
• NZD is among the poorest performers early Friday, with NZD/USD ending a consolidative phase to resolve lower. The pair has shown below the 200-dma of 0.5882 and a close below the mark would be the first since October last year. An easier outlook for RBNZ policy ahead (Westpac added a further 25bps cut to their rate profie overnight) and a return higher for the USD is broadly responsible - but price action will likely look ahead to looming US-China trade talks for conviction here.
• Canada's jobs report is the key data release Friday, but it's the Fed speaker schedule that should keep markets busier. Fed's Barr, Kugler, Williams, Barkin, Goolsbee and Waller are all set to make appearances - the first real Fedspeak we'll have received in around two weeks outside of Powell's Wednesday press conference. BoE's Pill should also prove interesting - he is set to deliver the national MPC agent's briefing after being among the minority voting for unchanged BoE rates at the meeting this week. 

OPTIONS: Decent Two-Way Interest in Post-Jobs Report CAD Strikes

Larger options rolling off at the NY cut today include decently sized strikes at 1.1200 and 1.1260 in EUR/USD, Y145.00 for USD/JPY, $0.64 for AUD/USD and both topside and downside interest for USD/CAD post-jobs report at C$1.3750 and C$1.3990-00. Full details here:

• EUR/USD: $1.1200(E992mln), $1.1260(E890mln), $1.1275(E992mln), $1.1300(E1.5bln), $1.1350(E818mln), $1.1375-85(E954mln), $1.1400-10(E1.1bln)
• USD/JPY: Y141.00($1.3bln), Y145.00($2.2bln), Y145.50($688mln), Y146.00($744mln)
• GBP/USD: $1.3125(Gbp615mln), $1.3375(Gbp845mln)
• AUD/USD: $0.6400(A$1.0bln)
• USD/CAD: C$1.3700($1.2bln), C$1.3750($1.3bln), C$1.3990-00($680mln), C$1.4170($1.0bln)
• USD/CNY: Cny7.4000($697mln)

EQUITIES: Eurostoxx 50 Futures Remain in Bull Cycle Following Latest Advance

• Eurostoxx 50 futures remain in a bull cycle. The contract traded to a fresh short-term cycle high on Thursday, reinforcing bullish conditions. Note too that price has traded through 5263.01, 76.4% of the Mar 3 - Apr 7 bear leg. A continuation higher would signal scope for a climb towards 5341.00 next, the Mar 27 high. Initial support to watch lies at 5110.14, the 20-day EMA. Clearance of this level would signal a possible reversal.
• The bullish trend condition in S&P E-Minis remains unchanged. The contract has recently breached the 50-day EMA, at 5626.70. A continuation higher would expose 5837.25 next, the Mar 25 high and a bull trigger. It is still possible that the entire rally since Apr 7 is a correction. A reversal lower would signal the end of this corrective phase and expose initially, support at 5127.25, the Apr 21 low. First support to watch is 5560.62, the 20-day EMA.

COMMODITIES: Recent Pullback in Gold Considered Technically Corrective

• A downtrend in WTI futures remains intact and short-term gains are considered corrective. The move down that started Apr 23 signals the end of the correction between Apr 9 - 23. That cycle higher allowed an oversold condition to unwind. For bears, a move lower would refocus attention on $54.67, the Apr 9 low and a bear trigger. Clearance of this level would resume the downtrend. Key resistance to watch is $63.72, the 50-day EMA.
• The latest pullback in Gold appears corrective. The primary trend condition is bullish and a resumption of the bull cycle would signal scope for a climb towards the bull trigger at $3500.1, the Apr 22 high. Clearance of this level would confirm a resumption of the uptrend. Key short-term support has been defined at $3202.0, the May 1 low. A break of this level is required to signal scope for a deeper retracement.

Date	GMT/Local	Impact	Country	Event
09/05/2025	1045/0645		US	Fed Governor Adriana Kugler
09/05/2025	1115/1215		GB	BOE's Pill At National MPC Agency Briefing
09/05/2025	1230/0830		US	New York Fed's John Williams
09/05/2025	1230/0830	***	CA	Labour Force Survey
09/05/2025	1230/0830		US	Richmond Fed's Tom Barkin
09/05/2025	1235/0835		US	New York Fed's Roberto Perli
09/05/2025	1530/1130		US	Fed Governor Christopher Waller
09/05/2025	1530/1130		US	New York Fed's John Williams
09/05/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly