EUR: EUR/USD - Support Just Below 1.1600 Continues To Hold

The EUR/USD range overnight  was 1.1719-1.1780, Asia is currently trading around 1.1740. The pair drifted back toward 1.1700 before finding some buyers as the USD bears hold onto their conviction that a deal could still be done as the ceasefire is extended. The market wants to sell USD’s but it needs confirmation from either a positive resolution to talks or a breakdown and a resumption of hostilities to prove them wrong. We are now pulling back from the top-end of the range toward the 1.1850 area and I suspect we should continue to find it tough going up there in the short-term, or until we get any real agreement reached. I suspect 1.1650-1.1850 should cover us while the market waits for a clear signal to trade on.

• Financial Times on X: “Lufthansa cuts 20,000 flights to save fuel as prices soar.”
• US Homeland Security News on X: "Update: Negotiations are now officially DEAD!! Reports that Iran’s Revolutionary Guard places Qalibaf, Pezeshkian, and Araghchi under arrest as Military asserts control over the government in Tehran!"
• Options : Closest significant option expiries for NY cut, based on DTCC data: 1.1750(EU1.15b), 1.1800(EU1.09b), 1.1850(EU2.89b). Upcoming Close Strikes :  1.1550(EU1.55b April 23), 1.1650(EU3.98b April 23), 1.1825(EU3.69b April 23) - BBG
• The EUR/USD Average True Range for the last 10 Trading days: 61 Points

Fig 1 : EUR/USD Spot Daily Chart

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

*US BLOCKS IRAQ'S DOLLAR SHIPMENTS: WSJ
*US FROZE SECURITY COOPERATION PROGRAMS WITH IRAQ MILITARY
*CARGO-PLANE DELIVERY OF NEARLY $500M BLOCKED BY US: WSJ: WSJ
*US OFFICIALS SAY HOLD ON IRAQ DOLLAR SHIPMENTS TEMPORARY: WSJ" - BBG

" The Trump administration has suspended U.S. dollar shipments to Iraq and frozen security cooperation programs with its military, escalating the pressure on Baghdad to dismantle powerful Iranian-backed militias, said Iraqi and U.S. officials." See this link for the full piece. 

Q1/March Australian CPI data print on 29 April and will be scrutinised closely for signs of ongoing excess demand but also any early impact from the Middle East conflict beyond fuel prices in the monthly March data. There are no Bloomberg consensus estimates yet but Q1 CPI was released on Tuesday in NZ and the two countries have historically high correlations, although NZ has a significant negative output gap whereas the RBA believed it was likely positive in Australia in H2 2025 and into Q1 2026, thus the current divergence in monetary policy. 

• NZ Q1 headline inflation was stable at 3.1% y/y while seasonally adjusted it moderated 0.1pp to 3.1%. With the correlation between NZ and Australia above 90%, headline in Australia may have also stabilised in Q1.

Australia vs NZ headline CPI sa y/y%

Source: MNI - Market News/LSEG

• The RBNZ’s sector factor model measure of core inflation eased 0.1pp to 2.7% y/y in Q1. This has a correlation with Australia’s trimmed mean of over 90% and so the latter may have stabilised around 3.4% y/y in Q1, but still too far above the top of the RBA’s 2-3% band especially as there remains a very real risk of second-round effects from higher fuel prices.

Australia vs NZ core CPI y/y%

Source: MNI - Market News/LSEG/RBNZ

• NZ Q1 non-tradeables inflation posted a higher-than-expected rise of 1.1% q/q but it was significantly impacted by the timing of domestically-determined administered prices. The annual rate was stable though at 3.5% y/y while services inflation moderated 0.5pp to 3.5%. There was a pickup in goods prices though to 2.8% from 2.5%, which have a high international composition.
• With the shift in Australia towards monthly CPIs, there is now limited history for a number of series. As seasonally adjusted measures take time for the factors to be determined, we’ve done the NZ-Australia correlations with seasonally adjusted indices.