FED: Waller Adds Another Reason To Pay Interest On Reserves

• RES 4: 0.8557 High Apr 28  
• RES 3: 0.8541 High May 2 
• RES 2: 0.8502 38.2% retracement of the Apr 11 - May 29 downleg
• RES 1: 0.8469 High Jun 10
• PRICE: 0.8452 @ 16:19 BST Jun 10
• SUP 1: 0.8407/8356 Low Jun 4 / Low May 29 and the bear trigger 
• SUP 2: 0.8327 1.382 proj of the Apr 11 - 16 - 21 price swing
• SUP 3: 0.8316 Low Mar 28 and a key support
• SUP 4: 0.8277 1.618 proj of the Apr 11 - 16 - 21 price swing

EURGBP traded higher Tuesday. The recovery has resulted in a break of resistance at 0.8440, the 50-day EMA. This highlights a potentially stronger reversal and exposes 0.8541, the May 2 high. For bears, support to watch lies at 0.8356, the May 29 low. Clearance of this level would resume the downtrend and open 0.8316, the Mar 28 low and a key support. Initial support has been defined at 0.8407, the Jun 4 low.   

• Bloomberg reports that Treasury Secretary Bessent is emerging as a possible contender to succeed Fed Chair Powell when his term expires in May 2026.
• It followed President Trump on Friday saying he would name a successor for Powell “very soon” (see here).
• Former Fed Governor Warsh, long since seen as a front runner, was interviewed by Trump for the Tsy Sec role in November according to people familiar with the matter. Asked specifically about Warsh on Friday, Trump said: “He’s very highly thought of.”
• The report notes that formal interviews for the Fed Chair position have not begun according to two of the people.
• “I have the best job in Washington,” Bessent said in response to a request for comment. “The president will decide who’s best for the economy and the American people.”

• There has been little reaction in near-term Fed rates to the 3Y Treasury auction and then Bloomberg sources reporting that Tsy Sec Bessent is emerging as a possible contender to succeed Powell as Fed Chair when his term expires May 2026.
• The Dec 2025 implied rate is back near yesterday’s close after a 2 bp intraday lift on a recovery in US equity futures. It more broadly holds Friday’s shift on payrolls back towards the most hawkish levels since February.  
• Day two of US-China trade talks in London are in immediate focus, currently on a break and set to resume at 8pm local.
• Tomorrow’s CPI report looms large though. MNI Preview here.
• Cumulative cuts from 4.33% effective: 0bp Jun, 3.5bp Jul, 17bp Sep, 28.5bp Oct and 44.5bp Dec.
• The SOFR implied terminal yield of 3.375% (SFRZ6) is also unchanged on the day. The ~95bp of cuts implied compares with ~90bp of cuts at Friday’s close.