IRAN: Reports Of Second Wave Of Explosions

NZGBs are unchanged after US tsys finished modestly richer on Friday despite stronger than expected Nonfarm payrolls in April.

• The Kobeissi Letter on X: "Iran responds to the US with a "10-point" message:
• "1. US military presence is described as the "main source" of instability"
• "2. American bases are portrayed as "unable to secure themselves"
• "3. Iran says the Strait of Hormuz should be free of the US"
• "4. Tehran describes a "shared destiny" with Gulf countries"
• "5. Foreign powers are declared unwelcome in the Persian Gulf"
• "6. Iran says its growing influence is part of a new regional order"
• "7. Controlling of the Strait of Hormuz is explained as key to security"
• "8. Iran says it wants to end "hostile exploitation" of Hormuz"
• "9. New rules and management are promised to boost regional prosperity"
• "10. Tehran says the new strategy would benefit the Iranian economy"
• "President Trump on the response just now: "I don't like it."
• Swap rates are little changed.
• RBNZ-dated OIS pricing is little changed across meetings. 9bps of tightening is priced for May, while February 2027 assigns 102bps.
• The local calendar will be empty on Monday, ahead of N.Z. Government 9-Month Financial Statements and RBNZ's Breman Panel Discussion on Tuesday.

Shifts in yen positioning were likely the biggest focus point in last week's CFTC FX positioning update. We saw leveraged and asset manager shorts pared in the yen, as Japan FX intervention took the pair away from the 160.00 level through late April/early May. Last week's CFTC update was to May 5 (so last Tuesday), so doesn't cover all the potential market adjustments from a an intervention standpoint. On May 6, USD/JPY dipped sharply from the high 157 region to close to 155.00. Leveraged positions for yen, just beyond -61k, while in from recent extremes, is still fairly wide by historical standards. Headwinds for JPY remain in terms of the negative terms of trade shock, only gradual BoJ tightening pace and better US data outcomes (Friday's NFP beat etc), which is a factor paring market Fed easing expectations. At the start of this week we have US Tsy Secretary Bessent in Japan, where no doubt some of the focus will be on FX market trends. 

• Elsewhere in terms of the positioning update, we saw modest selling against both EUR and GBP in the leveraged and asset manager space. This didn't shift aggregate positioning though. GBP/USD is seeing some pressure amidst fresh UK political headwinds, as Starmer's Labor party lost ground in recent local elections (and whether Starmer will remain as PM). GBP/USD is not breaking sharply lower though and remains within May to date ranges.
• AUD leveraged longs were added to, even amidst an RBA hike last Tuesday which didn't add any fresh hawkishness to the near term policy rate outlook. AUD/USD dips remain well support though.
• Finally, CAD shorts in the leveraged space were cut back, while asset manager longs were added to. 

Table 1: CFTC FX Positioning Update By Major Currency - Weekly Change & Outright Levels 

Source: CFTC/Bloomberg Finance L.P./MNI 

This week's China April CPI and PPI data will be the key release to start the week. This release is critical as it will show whether March’s exit from factory-gate deflation was a temporary energy spike or a structural shift toward reflation.

After snapping 41 consecutive months of decline in March  rising +0.5%, the focus is on whether the PPI can sustain its positive momentum.   Factory-gate prices have been bolstered by surging global energy costs and the government's "anti-involution" policies designed to curb destructive price competition.

Markets forecast a jump to +1.8% for the April PPI (from +0.5% in March) which would add further to the idea that industrial margins are finally recovering, which will likely provide a tailwind for the CSI 300 industrial and materials sectors.  

April CPI is forecast to hold steady around 0.9% (down slightly from prior month’s 1.0%) as high-frequency indicators point to lower food prices. YoY gains in vegetable prices slowed while fruit and pork costs swung to declines. Non-food prices will likely have provided some offset, with transport costs picking up ahead of the early May holiday.

For markets, a PPI beat would be a hugely positive signal that China is successfully exporting inflation rather than deflation and will be strike a cautionary note for bond investors in the region.   Locally, a positive PPI/CPI combination would reinforce the PBOC's current liquidity approach, as the need for aggressive emergency stimulus fades in favour of structural support.