Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

No Surprises From Fed Minutes, Sunak Expected To Announce New Help For Households

By CMC Markets (Michael Hewson)Market OverviewMay 26, 2022 06:17
No Surprises From Fed Minutes, Sunak Expected To Announce New Help For Households
By CMC Markets (Michael Hewson)   |  May 26, 2022 06:17
Saved. See Saved Items.
This article has already been saved in your Saved Items

European markets had a much more positive bias yesterday, helped by more resilience in the US, which finished the day strongly higher after the release of the latest Fed minutes.

This positive finish took a bit of a knock after the close as another disappointing set of earnings numbers, this time from Nvidia (NASDAQ:NVDA) prompted US futures to slide back, a touch, nonetheless it isn’t expected to translate into too much of a headwind for today’s European open.

Asia markets are broadly mixed with European markets expected to see a modestly cautious open later this morning.

These saw the Fed make a modest adjustment to estimates for 2022 PCE inflation, which were adjusted slightly higher to 4.3%, and then a steep fall to 2.5% in 2023, while at the same time officials discussed the prospect of more aggressive moves.

What did last night's Fed minutes tell us that we didn’t already know? The answer is not much, which is probably why there was little in the way of market reaction, with the Nasdaq 100 and S&P 500 finishing the day higher.

Markets have already become comfortable with the idea of further 50bps rate rises in June and July, with further rate rises to come, along with discussions about the prospect of moving rates beyond neutral to help constrain above-target inflation. None of this is new, but it’s also not particularly instructive given that not one FOMC member has the same measure of where the neutral rate actually is.

Market pricing of where the Fed funds rate is likely to be at year-end is at 2.5%, which could well be where the neutral rate is, however various policymakers have differed about where the real level actually is, probably because they don’t know.

Kansas City Fed President Esther George has suggested 2.5% as a starting point, while St. Louis Fed President James Bullard put it lower earlier this year at 2%, while calling for rates to rise to 3.5% by year-end.

We’ve also seen some signs in the last few days of some modest cracks in the hawkish consensus after recent comments from Atlanta Fed President Raphael Bostic, who suggested a September pause might be appropriate. He has also floated the idea of a neutral rate of between 2% and 2.5%.

In summary, there was little in the minutes to scare the horses with today’s latest US Q1 GDP expected to be adjusted upwards to -1.3%, with personal consumption set to be nudged higher to 2.8%, with the focus expected to be on tomorrow’s April PCE numbers.

The surprise -1.4% contraction a few weeks ago has raised concerns that the US economy could be heading towards a stagflationary style slowdown and possible recession, despite low levels of unemployment. There have been attempts to play down the extent of the slowdown in Q1, with the citing of slower inventory rebuilds after Q4 which saw a significant pull forward for Christmas.

Net trade contributed to a -3.2% drag while inventories saw a -0.8% decline, on the back of supply chain disruption. Personal consumption was fairly resilient; however, this will face challenges in the months ahead due to higher prices.

We also have the latest set of weekly jobless claims numbers which have started to edge back up over the last few weeks. They hit a 50-year low at the start of April at 167k, however, they’ve started to move higher and back above 200k hitting 218k last week, a two-month high. Today’s claims are expected to come in at 215k, with continuing claims remaining steady at 1.31 million.

It’s also been speculated that the UK Chancellor of the Exchequer Rishi Sunak will today announce some emergency measures to help the most vulnerable UK households to help alleviate the strain on their finances because of the surge in energy prices.

The package, which it is said is expected to be in the region of £10bn, is also likely to be a welcome distraction for the government in the wake of the furore over the Sue Gray report over gatherings and parties at Number 10 and the Cabinet Office.

The big question is how it will be paid for, with speculation that we could see the announcement of a windfall tax of some description, in a move that while politically popular, could have wider unexpected and negative consequences further down the line, when it comes to encouraging business to invest in the UK.

It would also be seen as a political win for the opposition parties who have been campaigning for such a move for weeks now.

Either way, it would be the latest example of a government reacting to events, rather than shaping them.

EUR/USD – the failure at the 1.0750 area has seen the euro slide back, with resistance also at the 50-day MA. We also have trend line resistance from the February highs, just above that. We currently have support at the 1.0530 area.

GBP/USD – finding support at the 1.2470 area and the lows this week. While this holds, we need to see a move beyond the 1.2630 area to argue a short-term base is in. Below the 1.2470 area, argues for a move to the 1.2320 area. Above 1.2630 argues for a return to the 1.2830 area

EUR/GBP – held below the resistance at the 0.8600 area, and has since slipped back, below support at the 0.8520/30 area, with further support at the 0.8480 area.

USD/JPY – continues to hold above the 50-day MA, with a break potentially opening a move towards the 123.00 area. We currently have resistance at the 128.30 area.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

Original Post

No Surprises From Fed Minutes, Sunak Expected To Announce New Help For Households

Related Articles

No Surprises From Fed Minutes, Sunak Expected To Announce New Help For Households

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email