A New Hope

May 06, 2026

Elias Haddad

Risk-on supercharged on Iran deal optimism. Stock and bond markets surge. USD and crude oil prices plunge.

Sweden disinflation unexpectedly deepened in April. Riksbank rate hike bets slashed.

US ADP print and Treasury quarterly financing details take the spotlight. NBP poised to stand pat.

Comments by President Donald Trump turbocharged the financial market recovery narrative. The president cited “Great Progress” toward “a Complete and Final Agreement with Representatives of Iran.” As if on cue, Axios reported the US and Iran are closing in on a one-page memo to end war.

Brent crude oil prices are down by over 12% from Monday’s high of $115 a barrel. The MSCI index of global stocks advanced to a record high, with US equity futures pointing higher across the board. Major bond markets are rallying, and the dollar is down against most major currencies.

Energy-sensitive NOK is underperforming. USD/JPY dropped swiftly from 157.80 to a low around 155.04 late during the Asia trading session. The quick-fire move may partly reflect intervention as Japanese officials likely leaned into broad USD weakness.

In our view, USD downside is limited because recent US economic data are likely to keep odds of Fed funds rate hikes in play. The April ISM indexes point to a stabilizing labor market and upside risks to inflation. In parallel, the JOLTS hiring rate rose to a two-year high in March while layoffs continued to be low and stable. Focus today is on the April ADP private payrolls print (1:15pm London, 8:15am New York). Consensus expects ADP private payrolls at +120k vs. +62k in March.

The US Treasury will release today the financing details related to its quarterly refunding plan (1:30pm London, 8:30am New York). On Monday, the Treasury disclosed it expects to borrow $189 billion in privately held net marketable debt over Q2, that’s $79 billion higher than announced in February primarily due to lower projected net cash flows. Over Q3, the Treasury plans to borrow $671 billion in privately held net marketable debt.

Market will watch for any shift in coupon issuance (2y, 3y, 5y, 7y, 10y, 20y, 30y) versus bills, with steady auction sizes expected. If so, the long end of the yield curve should be capped and is USD neutral. But any supply tilt to longer duration can raise the term premium and weigh on USD.

SWEDEN

USD/SEK is down on broad USD weakness. Sweden disinflation unexpectedly deepened in April, supporting the case for an extended Riksbank hold. CPIF dropped -0.8pts to 0.8% y/y (consensus: 1.2%, Riksbank forecast: 1.5%) while CPIF ex-energy plunged -1.1pts to 0% y/y, matching the November 1996 record low, (consensus: 0.4%, Riksbank forecast: 0.7%).

The swaps curve adjusted lower, converging toward the Riksbank’s policy rate path. The March Monetary Policy Report b showed the Riksbank pencils in the policy rate at 1.75% until Q4 2026, followed by a 25bps hike to 2.00% by Q1 2028. The Riksbank is widely expected to keep the policy rate at 1.75% for a fifth consecutive meeting tomorrow. Positive real rates bode well for SEK.

NEW ZEALAND

NZD/USD surged on broad USD weakness, pushing toward 0.6000, and nearly wiping out its war-driven losses. New Zealand Q1 labor market data was mixed. Employment growth undershot expectations at 0.2% q/q (consensus: 0.3%, RBNZ forecast: 0.4%) vs. 0.5% in Q4. The unemployment rate dipped 0.1pts to 5.3% (consensus: 5.4%, RBNZ forecast: 5.3%) but that was largely because of a lower participation rate. Private regular wages growth ran hot at 0.5% q/q (consensus & RBNZ forecast: 0.4%) vs. 0.4% in Q4.

The swaps market firmed up odds of a first full 25bps RBNZ rate hike at the July 8 meeting, and a total of 125bps of tightening over the next twelve months to 3.50%. The risk is the RBNZ delivers less rate increases than is currently priced in which is a headwind for NZD. The RBNZ sectoral factor inflation model dipped to 2.7% y/y in Q1 vs. 2.8% in Q4 and the bank forecasts a negative output gap of -0.9% over 2026.

POLAND

National Bank of Poland (NBP) is widely expected to keep the policy rate unchanged at 3.75% for a second straight meeting today. NBP will likely signal that its easing cycle, which saw it deliver 200bps of cuts in the past year, is over. Poland headline and core CPI inflation are tracking above the NBP’s Q1 projection of 2.2% and 2.6%, respectively. Poland’s positive real rates and favorable balance of payments backdrop continue to underpin PLN.

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