US: Trump adding on the Fed on Truth Social

Tomorrow’s BoE guidance is set to be key for the short-term direction of markets, assuming the fully discounted 25bp cut is delivered.

• We continue to point to SFIM5/M6 and GBP 1y1y as prime candidates for further dovish repricing, particularly given the shallow policy easing path priced in through early ’26 at present (~10bp of cumulative easing priced between the Dec ’25 & Mar ’26 gatherings).
• Although global tariff risks have moderated a little in recent weeks, a dovish BoE guidance tweak alongside tomorrow’s decision could reignite dovish momentum.
• We have outlined the removal of the word “gradual” as a non-negligible risk on this front.
• The removal of that word could be used to signal the potential for a more aggressive easing path (use of gradual equates to a once per quarter cutting pace, in the eyes of the market).
• BoE-dated OIS is already showing close to 100bp of cuts through year-end (~95bp last).
• 100bp of easing would correspond with a 25bp cut at 4 of the remaining 6 meetings due between now and year-end.
• Further out, SFIU6 represents the SONIA futures-implied terminal rate at present, last 3.37% vs. a current Bank rate of 4.50%.
• SFIM5/M6 flatteners would benefit from a more aggressive easing cycle being priced in in H126 (assuming H225 pricing is close to the viable dovish extreme against the current backdrop), while GBP 1y1y shorts could benefit from a wider range of dovish outcomes.
• Both have registered fresh cycle closing lows in recent sessions before a modest hawkish retracement. A fresh dovish catalyst is seemingly needed to promote a more meaningful extension.

• RES 4: 5864.43 200-dma     
• RES 3: 5837.25 High Mar 25 and a bull trigger 
• RES 2: 5773.25 High Apr 2       
• RES 1: 5724.75 High May 2                               
• PRICE: 5638.75 @ 14:27 BST May 7 
• SUP 1: 5536.59 20-day EMA                        
• SUP 2: 5355.25/5127.25 Low Apr 24 / 21 and a key support
• SUP 3: 4996.43 76.4% retracement of the Apr 7 - 10 bounce
• SUP 4: 4832.00 Low Apr 7 and the bear trigger

Bullish conditions in S&P E-Minis remain intact. The contract has breached the 50-day EMA, at 5622.98. A continuation of the bull phase 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 5536.59, the 20-day EMA.

Bank of America believe that “US rates are well priced for bad news, good news seems underpriced”. They see “scope for higher rates near-term as the market better balances risks to the outlook with a wait-&-see Fed”.

• As a result, they “recommend paying the U.S. front end (June FOMC OIS), remaining patient on initiating any belly longs & are underweight the back end (via short 30-Year asset swaps)”.