STIR: Expected policy easing further out the strip holding steady

• Higher oil prices and lower equities on Tuesday have contributed to a session of dollar strength. While currency market volatility remains contained amid the latest developments in the Middle East, the USD index is 0.4% higher as we approach the APAC crossover. While major currencies such as the EUR and JPY have weakened in line with the DXY strength, both GBP and SEK are showing clear relative underperformance.
• With European equity futures down 1.4%, EURSEK is up 0.46% to 10.9140, pushing through yesterday's 10.8943 high. A close above this level would be an important short-term bullish development in EURSEK, after the cross hovered between 10.80-10.90 over the previous two weeks. The next topside target is the 11.00 level. Initial support is the 50-day EMA at 10.8150, which closely aligns with a short-term trendline drawn from the April 21 low.
• NOK is the only G10 currency to outperform the USD today, with terms of trade tailwinds continuing to dominate. We noted yesterday that a small correction in NOKSEK may be needed for a clear push above parity - but the market has clearly not required such a signal. The cross is up 0.75% on the session, having briefly pierced resistance at the 2024 high of 1.0139.
• Uncertainty regarding the immediate future of Starmer’s tenure as PM continues to weigh on the pound, with ministerial resignations today amplifying the severity of the situation. Associated pressure on UK gilts has prompted the UK 30-year yield to rise to multi-decade highs, adding to the bearish GBP narrative.
• While GBPUSD is holding just above 1.35, it is worth noting that GBPAUD has been probing the cycle lows today, located just below 1.87.
• Australia wage price index data headlines the overnight calendar before US PPI on Wednesday. The focus will then swiftly turn to President Trump’s visit to China.

"U.S. CBP ANTICIPATES AS OF MAY 11 PAYING TARIFF REFUNDS WITH INTEREST OF $35.46 BILLION ON 8.3 MILLION ENTRIES -COURT FILING" - Reuters

• US TSY TO SELL $95.000 BLN 8W BILL MAY 14, SETTLE MAY 19