SOUTH KOREA: Import Prices Moderate; Correlations Suggest CPI to Remain Elevated

NZGBs are 4bps richer after recent Middle East headlines.

• A draft Iran–U.S. memorandum reportedly proposes lifting oil sanctions and the naval blockade, reopening the Strait of Hormuz, releasing $24 billion in frozen Iranian assets, and launching nuclear talks. European leaders backed sanctions relief conditional on verifiable nuclear steps and supported regional stability and ceasefires. – RTRS
• NZ’s retail card spending rose 1.7% m/m in May versus revised -1.2% in April.
• NZ’s PSI dropped to 47.5 in May from a revised 48.7 in April. PSI indicates a sector “struggling to get its head back above water”: BNZ senior economist Doug Steel. - BBG
• The focus is likely to be on Thursday’s Q1 GDP data.
• Q1 GDP prints Thursday and Bloomberg consensus expects it to rise 0.8% q/q & 1.0% y/y. There was a strong rise in Q1 manufacturing volumes, which with a solid rise in real retail sales and export volumes in the quarter should support GDP growth. The RBNZ has a 1% q/q Q1 increase in its May forecasts but expects Q2 to be flat as the impact of the Iran War is felt by the NZ economy.
• RBNZ-dated OIS pricing is little changed across meetings. 20bps of tightening is priced for July, while February 2027 assigns 76bps.

"JOINT STATEMENT FROM THE LEADERS OF THE E4, UK, FRANCE, GERMANY AND ITALY: WE ARE PREPARED TO LIFT RELEVANT SANCTIONS IN RESPONSE TO CLEAR, VERIFIABLE STEPS BY IRAN ON ITS NUCLEAR PROGRAMME.

JOINT STATEMENT FROM THE LEADERS OF THE E4 LEADERS: THE URGENT RE-OPENING OF THE STRAIT OF HORMUZ WITH UNCONDITIONAL AND UNRESTRICTED FREEDOM OF NAVIGATION IS ESSENTIAL

JOINT STATEMENT FROM E4 LEADERS: WE STAND READY TO WORK WITH THE US, IRAN AND THE IAEA TO THIS END.

JOINT STATEMENT FROM E4 LEADERS: WE REAFFIRM FULL SUPPORT TO THE STABILITY, SOVEREIGNTY AND TERRITORIAL INTEGRITY OF LEBANON AND THE IMPORTANCE OF A ROBUST CEASEFIRE." RTRS 

Oil has started the week sharply lower following the announcement of an US-Iran memorandum of understanding (MoU) that will allow the Strait of Hormuz to be opened and 60-days of negotiations. There are some inconsistencies with VP Vance saying that Iran won’t have nuclear weapons but that appears yet to be discussed along with sanctions relief, which is a priority for Iran. The US said that passage through the Strait will be toll free but Iran’s FARS stated that marine vessels through the Gulf will be “regulated by Iran” with Oman.

• Iran’s Tasnim agency is more conciliatory saying that the Strait will reopen on Friday, which President Trump corroborated. The US naval blockade will be completely lifted within 30 days. According to Pakistani PM Sharif, the MoU will be signed on Friday. Time is also needed to clear mines from the waterway.
• Iran’s MEHR reports that the MoU includes the reopening of the Strait within 30 days but under “Iranian arrangements”, which with other headline is unclear what will happen in practice. It also said that the US will need to propose a reconstruction plan of at least $300bn, which is likely to be a sticking point. All sanctions on oil and petrochemicals to be lifted and $24bn of frozen assets to be released during talks. European countries said they are prepared to remove “relevant sanctions”.
• WTI is down 4.1% to $81.34/bbl in Monday’s trading after starting at $82.42. Key support is at $77.22. On Friday, crude was optimistic that there might be a deal over the weekend falling close to 4%. It peaked on 3 June at $97.00 on doubts there would be an agreement.
• Brent is down 3.6% to $84.16/bbl today after starting around $85.93 on open, below initial support at $87.80 opening key support at $81.45. It reached a high of $98.99 on 3 June and last week of $98.08 on 8 June. The benchmark is now down 7.5% in June.