IRAN: Hegseth 'Unaware' Of Intel Saying Iran Moved Enriched Uranium Pre-Strike

The EC’s May consumer and business survey saw economic confidence rise to 94.8 (vs 94.1 cons, 93.8 prior). The data will have captured the tariff de-escalation between the US and China earlier this month, but did not account for the latest EU/US 50% tariff developments (the survey closed on May 20). Overall, there doesn’t seem to be enough weakness in the data to materially increase the likelihood of a 25bp cut in July from current levels (a cut in June remains essentially locked in). The fall in expected price metrics should keep the Governing Council focused on activity data, given growing confidence in the inflation outlook. 

• Developments in expected price metrics were dovish, falling across sectors. Services unwound April’s rise to move back to 3.0 (vs 4.6 prior).
• Consumer confidence was confirmed at -15.2 (vs -16.6 prior). There were improvements across forward and backward-looking components, but the “future unemployment expectations” subcomponent did rise for a second consecutive month to 28.5 (vs 27.4 in April, 24.2 in March).
• Meanwhile, the overall expected employment indicator ticked up a touch to 97.0 (vs 96.5 prior), still comfortably below the 2024 average of 100.3.
• Sentiment ticked higher in all sectors other than services.

Looking for Unchanged Rates into Year end:

• SFRU5 95.87/95.75ps 1x2, with 95.93/95.75ps 1x2, bought the strip for 3.25 in 5k.

• NZD sits among the worst performers in G10 on Tuesday, shrugging off the more optimistic tone for global equities and taking its cues from the broader dollar rebound. Today’s 0.65% selloff has seen NZDUSD gravitate back below 0.6000 handle, as a cluster of US election related highs between 0.6025/38 continue to cap the topside for the pair.
• 0.6038 also represents the 61.8% Fibo retracement of the Sep’24-Apr’25 selloff. A break above here would signal scope for a stronger move towards the 76.4% at 0.6168. On the downside, the 50-day EMA has yet to be tested following the sharp break above on April 10. This average intersects at 0.5873 and will be firm support ahead of the RBNZ decision overnight.
• The RBNZ decision will take focus overnight, where rates are widely expected to be cut 25bp to 3.25%. Given heightened uncertainty, the MPC is likely to retain its easing bias again stating it has “scope” to cut rates further if required and its updated OCR path will garner attention. A downward revision bringing the terminal to below 3%, estimated 'neutral', would signal the potential need for greater accommodation.
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