POWER: Orsted To Install Large Battery at Hornsea 3 Offshore Wind Plant

Westpac note that “AUD/NZD has risen sharply over the past two months. But the magnitude and speed of the gain left it technically stretched and vulnerable to a reversal. We see potential for such a reversal to reach the NZ$1.0750-1.0850 area during the month ahead.”

• “Yield spreads usually set the immediate tone for AUD/NZD and after hitting 18-month highs earlier last week just ahead of the RBA meeting, may now start to reverse.”
• “While the hawkish recalibration to RBA policy expectations has run its course, RBNZ policy expectations remain slanted to rate cuts and vulnerable to a reset.”
• “Stickiness in domestic sources of NZ inflation will likely require the RBNZ OCR to remain at its present level until at least the beginning of 2025, yet rates markets price in almost 50bp in rate cuts by the end of 2024.”
• “For those looking to hedge at current levels, options may be worthy of consideration given implied volatility is currently at record lows.”

SONIA futures are little changed to +1.5, with the uptick in Bunds providing some light support.

• BoE-dated OIS shows 13.5bp of cuts for the June meeting and ~57bp of easing through year end.
• We published our BoE review over the weekend.
• The MNI Markets team now assign around a 50% probability of a June cut from the BoE, a 40% probability of an August cut and a 10% probability that rate cuts are delayed further.
• Prior to the May meeting we had looked for a 10% probability of a May cut, a 30% probability of June, 40% probability of August and 20% probability of a delay beyond August.
• The latest survey from the Chartered Institute of Personnel and Development revealed a lack of movement in expected median pay settlements in the private sector for the coming 12 months, which sits at 4%. Meanwhile, expectations for the public sector were also steady, at 3%.
• Elsewhere, weekend press reports were dominated by pre-election posturing from PM Sunak.
• Tomorrow's labour market report provides the first UK release of note this week, although recent BoE-speak has pointed towards a greater focus on services inflation than wage metrics.