OIL: Crude Continues Downtrend On Ceasefire Hopes, Heading For Plus 15% May Drop

US President Donald Trump is shortly due to host King Charles III for a State Dinner at the White House. The event comes during the King's ongoing four-day State Visit to the United States, which included an address to a joint meeting of Congress earlier today. LIVESTREAM

The UK’s NIESR, an independent economic research institute, has revised down growth this year and next while inflation is expected to be higher due to the impact of the Iran War. One 25bp rate hike in July 2026 is now forecast but there’s 125bp of tightening in its “adverse” scenario. Inflation is not expected to return to target until 2028. The Bank of England updates its forecasts at its 30 April meeting.

• Growth is now projected to be 0.9% in 2026 and only 1.0% in 2027 revised from 1.4% and 1.3% in February, before the onset of Middle East hostilities. Its worse case scenario showed a “high likelihood” of a UK recession.
• Inflation picked up 0.3pp in March to 3.3% while core moderated 0.1pp to 3.1% - both well above the Bank of England’s 2% target. And now the NIESR is expecting it to rise to 4.1% by the start of 2027 because of higher global oil and gas prices because of the supply shock from the closure of the Strait of Hormuz.
• The NIESR notes that the UK is “highly exposed to global energy shocks”.
• It revised the unemployment rate slightly higher given slower growth and as a result wage increases should moderate to 3.3% in 2027. The unemployment rate should reach a high of 5.5% in Q4 2026.
• The NIESR also said that government budget surpluses are needed to reverse the UK’s “unfavourable” debt profile.

ACGBs (YM -5 & XM -3.5) are weaker ahead of today’s CPI data. 

• Overnight, US tsys finished showing a modest twist-flattener, with yields 1bp lower to 4bps higher, as the market turned their attention from Middle East tensions to Wednesday's FOMC and Canada policy announcements, followed by BOE and ECB this Thursday.
• Cash ACGBs are 3-5bps cheaper with the 3/10 flatter and the AU-US 10-year yield differential at +71bps.
• The bills strip pricing is -2 to -6 across contracts, with late reds leading.
• Today, the local calendar will see Q1 and March CPI data released. It will be monitored very closely to set final expectations for the 5 May RBA decision. It will also be scrutinised for any early impact from the Middle East conflict beyond fuel prices in the monthly March data.
• RBA-dated OIS pricing is firmer today, sitting 7-15bps firmer than last month's pre-CPI levels. Pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 86% for May to 197% by August and 285% by December 2026.
• This week's ACGB supply will be in line with the recent average weekly issuance of $2000mn. After yesterday’s sale of A$1000mn of the 4.25% 21 December 2035 bond, the AOFM plans to sell A$1000mn of the 4.50% 21 April 2033 bond on Friday.