US CREDIT UPDATE: US Market Close

The communications following Jerome Powell's final FOMC meeting as Fed Chair had two major undercurrents. The first was a vocal assertion of policy independence from political influence, in anticipation of the arrival of Kevin Warsh as Chair by the next meeting in June. The second - and related -  undercurrent was that the door to further rate cuts appears to be closing, with current FOMC members looking increasingly reluctant to support a continuation of the easing cycle regardless of the preferences of the incoming Chair. Rates markets concluded the meeting pricing in slightly more tightening. But appropriately given Powell's continued emphasis on seeing more data before making future decisions, most of this repricing through the meeting could probably be attributed to rising oil prices on developments in the US-Iran war saga.

• Easing Bias Could End Soon: While the FOMC Statement didn't remove the easing bias in favor of a more two-sided outlook on rates, three of the four voting regional Fed presidents (Hammack, Kashkari, and Logan) dissented, noting they "did not support inclusion of an easing bias in the statement at this time". That set an initial hawkish tone and made it clear that whatever his preferences on the direction of rates, Warsh will preside over a Committee with a very sizeable contingent (perhaps even a majority by the time he arrives) that at least wants to consider that the next move in rates will be up and not down.
• The minutes of the last two meetings have seen an increasing number of participants favor 2-sided guidance, rising in March to "some" (5 or so) from "several" (4 or so); we would be unsurprised given Powell's characterization in the post-meeting press conference about the discussion over the guidance that this number rose to perhaps 6 or seven at this meeting. That plausibly sets it up for 3-4 more members and thus a majority supporting an end to the easing bias by the next meeting, though it remains to be seen whether such a contingent on the 19-member FOMC would also constitute a majority on the (currently) more dovish 12-member voting group. Such a shift wouldn't rule out future rate cuts, but it would certainly indicate that it's not the Committee's base case.
• Powell said "we had quite a vigorous discussion about ..  the guidance and is it still appropriate and that kind of thing. I would say the number of people on the Committee who either could support that language change, changing to a more neutral stance so that a hike is likely as a cut, that number has increased over the intermeeting period. It's easy to see why ... It really was just a question of why do we need to do that now. We have so much to learn. There's so much uncertainly about the path ahead. There doesn't need to be any rush to make that decision now. Because what happens in the next thirty, sixty days, even by the next meeting could really change the picture around that language. So, you know, it was a much closer thing on the Committee than it was in March. That makes all the sense in the world seems to me."
• Not Powell's Last Stand: Unsurprisingly, much of the post-meeting press conference focused on Powell's future at the FOMC. He cleared up speculation about his future in saying that he would stay on indefinitely as a Fed Governor (term ends Jan 2028) past his mid-May Chair term end date: "I will not leave the Board until this [DOJ] investigation is well and truly over with transparency and finality and I stand by that.  I am encouraged by recent developments and watching the remaining steps in this process carefully.  My decisions on these matters will continue to be guided entirely by what I believe in the best interest of the institution and the people we serve.  After my term as chair ends on May 15th I will continue to serves as a governor for a period of time to be determined...In terms of when I leave, I will leave when I think it's appropriate to do so."
• He added that "I plan to keep a low profile as a governor. There's only ever one Chair of the Federal Reserve Board.  When Kevin Warsh is confirmed and sworn in he will be that Chair.  Once sworn in his colleagues will elect him to Chair the FOMC as well."
• By staying on the Board, though, it blocks the Trump administration from appointing a fresh board member - which, given the direction the current FOMC appears to be headed on the policy stance, could mean less support overall for a rate cut under Warsh.

• Treasuries look to finish weaker, near late session lows after the FOMC held rates steady, Fed vote was 8-4, 3 hawkish dissents and 1 dovish dissent. Tomorrow sees the Bank of England and ECB policy announcement.
• TYM6 trades 110-12.5 (-15) vs. 110-08 low, the bearish development exposes the bear trigger of 109-24. Curves moderately flatter: 2s10s -3.033 at 47.716, 5s30s -3.341 at 92.101.
• Chairman Powell sounded cautious on how the inflation outlook has changed since the March meeting: "For a long time, we've been working on on the hypothesis, really, that would lead to a one time price increase and that that would go away over time. In other words, it would be no further change.
• The Senate Banking Committee on Wednesday approved Kevin Warsh’s nomination to become the next Federal Reserve chair, a crucial step toward confirmation.
• Earlier in day, the Bank of Canada kept policy rate 2.25% as expected Wed but is ready to prevent higher energy prices from causing persistent inflation. "Our baseline forecast assumes oil prices will come down and US tariffs will remain at the current levels. If this holds true, a policy rate close to current settings looks appropriate to support adjustment in the economy and return inflation to target," Governor Tiff Macklem says.
• Tomorrow sees a particularly congested 0830ET data window, with the first look at Q1 GDP, March personal incomes and outlays, the Q1 Employment Cost Index and weekly jobless claims. Private domestic final purchases are on track to see a reasonably solid Q1 although Atlanta Fed’s GDPNow is more pessimistic than consensus when it comes to GDP growth.
• Geopol tensions remain: Crude has extended gains on Wednesday amid concerns that the blockade on Iran could be drawn out. A large US inventory draw was also supportive, as was Trump’s statement that he would consider military action in Iran after rejecting their offer to reopen the Strait.

• RES 4: 1.4015 High Dec 2 ‘25
• RES 3: 1.3985 76.4% retracement of the Nov 5 ‘25 - Jan 30 bear leg
• RES 2: 1.3878/3967 High Apr 13 / High Mar 31 and the bull trigger
• RES 1: 1.3742 50-day EMA 
• PRICE: 1.3670 @ 17:35 BST Apr 29
• SUP 1: 1.3598 Low Apr 27
• SUP 2: 1.3526 Low Mar 9
• SUP 3: 1.3482 Low Jan 30 and key support
• SUP 4: 1.3430 2.0% 10-dma envelope

The short-term bear cycle in USDCAD remains in play and gains are considered corrective. The break through 1.3631, the Apr 21 low, confirms a resumption of the downtrend and paves the way for an extension towards 1.3526, the Mar 9 low and the next key support. Initial resistance is seen at 1.3742, the 50-day EMA. A clear break of this average is required to signal a possible short-term reversal.