GERMANY: Border Control Order Risks Difficult Conversations For Merz w/Polish PM

RXM5 126/125/124 put fly, sold out at 3-4

NOKSEK extends session lows as US President Trump’s latest tariff threats against China weigh on crude oil and natural gas futures. The cross hovers just above support at 0.9147 at typing - the 76.4% retracement of the March 2020 – March 2022 bull leg. 

• Beyond this level, there is little in the way of firm support until 0.8530 (March 19, 2020 low). However, the intraday lows between March 20, 2020 and March 25, 2020 (0.9083, 0.8866, 0.8739 and 0.8639) may be worth monitoring in the interim.
• In addition to now familiar tariff-related headlines, NOKSEK may be sensitive to tomorrow’s Riksbank speeches, with Bunge (0645BST) and Thedeen (1230BST) scheduled to speak.
• Although inter-meeting Riksbank speak often aligns with rhetoric in the latest set of monetary policy meeting minutes, the lower-than-expected March inflation report and fallout from Trump’s “Liberation Day” announcements could tempt policymakers into suggesting a future cut is more likely than a future hike (even if the base case is for rates to remain at 2.25% for now).
• Earlier today, Swedbank added a 25bp cut in August to their forecast, after previously expecting rates to remain on hold at 2.25% through the course of this year.

As noted earlier (see 'FRANCE: RN Contemplating Censure Against Bayrou Gov't, Marginal Widening In OATs', 1214BST) the court decision barring Marine Le Pen from running for office for the next five years could pose immediate risks to political stability should the far-right Rassemblement National (National Rally, RN) look to actively oppose the minority gov't of PM Francois Bayrou in protest against the sentence. The Bayrou gov't relies on the left-wing New Popular Front (NFP) alliance and the RN not wanting to vote together in a confidence motion, as without support from both wings of the political spectrum, the required majority in the National Assembly cannot be achieved. 

• As such, in each instance of censure votes being brought against Bayrou, the measure has only been able to gain the support of one or the other. The last time that the two sides voted together was on the censure motion that deposed the short-lived gov't of PM Michel Barnier in Dec 2024.
• On 15 April, Bayrou is set to unveil "the general framework" of the options open to the gov't regarding the 2026 budget. It remains to be seen what issue, whether budgetary or pensions related, could provide the spark that sees the RN back an NFP censure motion. In any case, President Emmanuel Macron would be in a difficult position, trying to put together a gov't that could fall apart either immediately or within months given that new legislative elections will be possible from July onwards.