FED: Reserves Eclipse $3.4T As Treasury Cash Pulls Back (1/2)
The Federal Reserve's latest H.4.1 release shows a further $68B increase in reserves in the week to Wednesday June 11, bringing the 4- week rise to $194B, and the increase since the end of April to over $400B. The current level of $3.43T is the highest since the week of April 9, and is clearly in "abundant" territory, per the Fed's nomenclature.
- Mirroring reserves' rise, the Treasury General Account has dropped to its lowest weekly level ($277B, down $99B this week and $285B in the last month) since mid-2023, down $400B since the end of April.
- This was expected, as Treasury cash picked up in mid-April's tax take but is winding down amid the debt limit impasse. There should be a pickup in the coming days alongside the mid-June tax deadline, but as Treasury Secretary Bessent reminded Congress this week, the "x-date" is estimated to arrive in mid-to-late summer.
- Reverse repo facility takeup has ticked up both on a weekly and monthly basis, perhaps unexpectedly so, though is unlikely to rise much beyond current levels ($205B).
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USDCAD TECHS: Rally Meets Resistance
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4035 50-day EMA
- RES 1: 1.4016 High May 12
- PRICE: 1.3959 @ 17:05 BST May 13
- SUP 1: 1.3814/3751 Low May 8 / 6 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD continues to trade above its recent lows. Despite the latest gains, the trend condition remains bearish and the move higher is considered corrective. A fresh cycle low last week reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4035, the 50-day EMA.
US DATA: Eggs Lead Rare Food Price Deflation In April
Headline CPI was a little softer than expected in April, actually undershooting consensus by more than its core counterpart.
- At 0.22% M/M (-0.05% prior, 0.30% MNI median), there was a bit of a divergence in food versus energy dynamics.
- Food prices fell 0.1%, versus expectations of a 0.2% rise, and a sharp pullback from 0.4% prior. This was the lowest figure - and first M/M deflation - since November 2020.
- "Food at home" fell 0.4% M/M, the lowest since July 2020, with disinflation/deflation evident across many categories. The most dramatic drop was in eggs, which had risen 35% in the first three months of 2025, but with their 12.7% M/M decline in April (the biggest fall since at least 2000), they're now up "just" 18% for the year.
- This covered up a third consecutive 0.4% M/M rise in "food away from home", marking the most inflationary price dynamics in this category since late 2023/early 2024. The 0.44% reading for April was a 15-month high in its own right.
- Energy's 0.7% rise in contrast marked a reversal higher from prior (-2.4%), and was above-consensus (0.3% MNI median).
- Gasoline prices were a little higher than expected at -0.1% (-0.5% MNI median), versus -6.2% prior.
US TSYS: Rates Quickly Reject Early Highs After Slight CPI Miss
- Treasuries look to finish near late Tuesday session lows - holding a relatively narrow range through the second half. Tsys had extend highs after slighly lower than expected CPI inflation measures.
- There is little in this report alone to suggest a meaningful gap between CPI and PCE - in other words, the slight downside miss in core CPI doesn't carry a major re-interpretation for PCE via the components. Note April core PCE consensus was 0.24% M/M coming into today, and while this may dip slightly we doubt forecasts will be radically changed (core CPI came in at 0.22% M/M).
- As for broader trends, the core CPI six-month rate held at 3.0% annualized for a second month in April having moderated from 3.7% in January, although it’s still a fourth consecutive month above the Y/Y.
- Treasury Jun'25 10Y futures currently trades at 109-31.5 (-5.5) -- breaching support at 110-01+, a Fibonacci retracement point as well as yesterday’s low. Clearance here strengthens a bearish theme and exposes a key support at 109-08, the Apr 24 low.
- Curves bear steepened, 2s10s +1.515 at 46.949, 5s30s +1.966 at 81.118.
- The greenback has weakened on Tuesday, eroding a solid portion of the prior session advance. Amid the continued bid for major equity indices, the US dollar traded in a more typical manner with risk, weakening against most G10 peers and in particular against the likes of AUD and NZD.
