JGBS: Twist-Flattening After Supplementary Budget Approved

The AUD & NZD are both consolidating their recent gains, both are pushing up against their recent highs that have proven to be tough resistance. The USD bears will be looking to challenge these areas at some point this week after gaining footholds above 0.7200 and 0.5900 respectively.

• {AUDUSD Curncy} - 0.7205, +0.05%
• {NZDUSD Curncy} - 0.5905, -0.08%
• {AUDNZD Curncy} -  1.2205, +0.05%

The BBDXY range Friday night was 1188.73-1193.80, Asia is currently trading around 1192. The USD found some support back toward 1188 on Friday night as the support for the USD holds for now. Those USD bears will be a lot more comfortable to start this week and with Global Central Banks all lining up to potentially start hiking imminently the pressure is likely to build. I have been struck by the inability of the USD to really build any momentum as a safe-haven, and how quickly the market is to jump on any weakness. Any signs of potential peace talks or ships moving through the Straits will only further add to the USD’s headwinds. On the day, the bears will be looking to re-challenge that 1185-1188 area. I suspect we see some demand toward that 1185 area initially, but a sustained break below 1185 will start to get the Bears excited to challenge the pivotal 1170-1175 area again. The first resistance is back toward 1195-1198.                           

• @Pentosh1 on X: “it's sunday evening, as is tradition with every Sunday before futures open; another new peace deal is about to hit the market. The strait has now reopened for the 14th Sunday in a row ” 
• MNI INTERVIEW: Warsh Fed Won’t Manage To Ease Soon-Hubbard. The Federal Reserve’s incoming chair Kevin Warsh would have a tough time convincing an increasingly hawkish FOMC to go along with rate cuts at a time when a large energy shock is creating fresh fears of inflation, former White House Council of Economic Advisers Glenn Hubbard told MNI. “It would be hard to believe that the Fed could cut rates immediately given all the obvious pressures on inflation and the fact that the real economy is still fairly solid,” said Hubbard, who served in the CEA alongside Warsh before he became a Fed governor.
• The BBDXY Average True Range for the last 10 Trading days: 5.45 Points

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

RBA-dated OIS pricing is 1-8bps softer meetings versus last week's pre-CPI levels, with late 2026 / early 2027 leading. 

• March CPI was slightly lower than expected at 4.6% y/y up from 3.7% while the underlying trimmed mean rose 0.3% m/m to be stable at 3.3% y/y. Q1 trimmed mean was close to consensus rising 0.8% q/q rising to 3.5% y/y from 3.4%. Headline increased 1.4% q/q as expected.
• Nevertheless, OIS pricing continues to show tightening across all meetings, with the probability of a 25bp hike rising from 80% for tomorrow to 179% by August and 256 by December 2026.
• Moreover, the market remains more confident about a May hike than it was ahead of February and March 25bp hikes.

Figure 1: RBA-Dated OIS – Current Vs. Pre-CPI

Source: Bloomberg Finance LP / MNI