GLOBAL POLITICAL RISK: Bahrain Issues Warning Siren

NZGBs are 1bp richer after US tsys finished Friday’s session slightly mixed. US tsys rebounded from modest session cheaps prior to flash ISM data: weaker than expected employment and manufacturing (steady to prior), new orders gained - but lower than expected, while Prices Paid surge (highest since April 2022), reflecting impact of war with Iran.

• Fresh off last week's Hawkish Hold (rates kept at 3.50%-3.75%) that saw the 10-year +7bps for the week, the market will look to Fed officials who speak this week to see if the if higher-for-longer narrative is growing. NY Fed President John Williams (today), Governor Bowman (Tuesday), and Austan Goolsbee  (Wednesday) will kick things off and markets will look for any mention of the "neutral rate."
• (AFP) via BBG -- "US President Donald Trump said Sunday that "very positive discussions" were under way with Iran on finding a solution to the crisis, but nevertheless added that the United States will soon start escorting ships through the blocked Strait of Hormuz."
• Swap rates are 3bps lower.
• RBNZ-dated OIS pricing is little changed across meetings. 7bps of tightening is priced for May, while February 2027 assigns 102bps.
• The local calendar will see a speech by RBNZ MPC Member Prasanna Gai.

The USD/JPY range Friday night  was 155.50-157.28, Asia is currently trading around 156.80. The pair has chopped around between 155.50-157.50 as the market finds its feet after last week's intervention. The BOJ has shown us their line in the sand and after endless threats have finally followed through. The previous time they came in there were multiple waves of intervention during various time zones, it seems they have only done a one off so far, though the market will be wary now, potentially expecting another round. If they do not back up last week's selling I suspect the pair will find a base and slowly drift higher again, though the desire to test 160 again could be dampened in the short-term. On the day, the first real support is back toward 152.50-154.50 so it will be interesting to see if the BOJ has another go to test this area. If the BOJ does not come in I suspect we drift back toward 157.75-158.50 where we should then see some sellers come back in.

• “Japan likely spent around $34.5b Thursday in its first currency intervention to prop up the yen since July 2024, according to a Bloomberg analysis of central bank accounts.” - BBG 
• MNI INTERVIEW: Warsh Fed Won’t Manage To Ease Soon-Hubbard. The Federal Reserve’s incoming chair Kevin Warsh would have a tough time convincing an increasingly hawkish FOMC to go along with rate cuts at a time when a large energy shock is creating fresh fears of inflation, former White House Council of Economic Advisers Glenn Hubbard told MNI. “It would be hard to believe that the Fed could cut rates immediately given all the obvious pressures on inflation and the fact that the real economy is still fairly solid,” said Hubbard, who served in the CEA alongside Warsh before he became a Fed governor.
• CFTC Data up to 28/04/2026 shows Asset Managers had just started building on their very newly built short Yen position, -24492(Last -12792). The Leveraged community continued to add to their own larger core shorts, –88543(Last -80578).
• Options : Close significant option expiries for NY cut, based on DTCC data: 158.00($753m), 160.00($370m). Upcoming Close Strikes : 156.00($1.01b May 7), 158.00($1.09b May 7), 159.15($953m May 6) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 138 Points

Fig 1 : JPY CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P

• Gold is likely to be range bound this week ahead of some pivotal data releases in the US that may give clearer insights into the future direction for rates.  
• Bullion finished Friday down 2% for the week at US$4,618 - just below the key technical level of $4,640 which until recent falls had acted as a floor to gold prices.  
• Gold remains just below the 100-day EMA of $4,654, with the 200-day EMA below at $4,336.
• Having enjoyed the run up in prices in 2025 on account of expected rate cuts, gold prices are now repricing as rate expectations potentially turn hawkish.  
• This week will be pivotal for gold with a big week of data which will give further guidance on the outlook for growth versus the looming inflation threat.  
• In the Asia trading day, gold has opened up +0.30% at US$4,626.