Daily Market Outlook, April 22, 2024

Munnelly’s Macro Minute…

“Middle East Tensions Recede Markets Consolidate”

Equity markets in Asia mostly traded higher as tensions in the Middle East remained stable, allowing attention to shift back to corporate earnings and economic fundamentals. Oil and gold prices continued to ease, signaling a relief rally in the markets. Bank of Japan Governor Ueda suggested over the weekend that loose monetary policy would persist due to soft underlying inflation. Concerns over escalating tensions in the Middle East continue to affect financial markets, potentially delaying interest rate cuts by central banks. In the US, recent positive economic data, including stronger-than-expected retail sales, prompted some Federal Reserve policymakers to reconsider the timing of rate cuts, diminishing expectations of cuts in June or July. Now, markets anticipate only one 25 basis point rate cut by the end of the year.

Expectations for rate cuts by the Bank of England and the European Central Bank have also diminished, although both are still seen as likely to cut rates before the Fed. Domestically, indicators suggest an acceleration in economic growth in early 2024. Later today, the April CBI industrial survey is expected to show ongoing improvement in the manufacturing sector, with insights into business investment intentions. Attention will also be on the price expectations component. Additionally, the Eurozone consumer confidence report for April and the March Chicago Fed national activity index in the US will draw interest. ECB speakers Villeroy and President Lagarde are expected to affirm the ECB's plan to lower interest rates starting in June.

This week, the main event is the Bank of Japan's policy meeting on Friday, where new inflation forecasts are expected, although economists believe it is too early for another interest rate increase. Stateside, the focus will be on Friday's PCE deflator, which is the Fed's preferred measure of consumer prices. There will be no public comments from Federal Reserve officials as we are entering the blackout period before next week's policy decision. However, the consistent message from every Fed official recently has been that there is no urgency to decrease interest rates.

Overnight Newswire Updates of Note

ECB’s Villeroy Says Oil Uncertainty Won’t Stop June Rate Cut
Asking Prices For UK Homes Close To Record High, Rightmove Says
China’s Benchmark Lending Rates Kept Unchanged
Australia To Cut Key Global Economy Growth Forecasts In Budget
US Dollar’s Extended Reign Delivers Stark Wake-Up Call For Markets
10-Yr Tsry Falls As Investors Weigh Econ Data And Israel Strike Against Iran
Oil Prices Dip As Iran-Israel Fears Cool, Economic Jitters Persist
South32 Expects Gemco Wharf Operations Restart To Take Up To A Year
Microsoft, Beset By Hacks, Grapples With Problem Years In The Making
Tesla Cuts Prices Around The World As Sales Decline In A Chaotic Week

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0550 (942M), 1.0600 (350M), 1.0700 (1.4BLN)
EUR/CHF: 0.9600 (425M). GBP/USD: 1.2400 (1BLN)
AUD/USD: 0.6475 (559M). AUD/NZD: 1.0815 (584M)
USD/CAD: 1.3775 (809M), 1.3900 (643M)
USD/JPY: 153.25 (1.4BLN), 154.00 (410M), 154.10-20 (1.2BLN)
154.75 (529M), 155.00 (1.4BLN)
Major EUR/USD strike expirations include 1.0550 and 1.0700 on Monday, totaling €1 billion each, followed by Wednesday's 1.0650 strike worth €800 million and 1.0700-05 worth €2.1 billion. Thursday sees strikes at 1.0640-50 and 1.0750-60, each valued at €1 billion, while Friday features strikes at 1.0600-10 (€1.8 billion), 1.0645-50 (€2.3 billion), and 1.0680-85 (€1 billion).Notable GBP/USD strike expirations occur on Monday at 1.2400 (£1 billion), Wednesday at 1.2450 (£553 million), and Wednesday again at 1.2645-50 (£1.1 billion). Thursday's noteworthy strikes include 1.2495-1.2500 (£626 million), while Friday features strikes at 1.2365 (£605 million), 1.2430 (£880 million), and 1.2500 (£677 million). Stand-out AUD/USD strike expirations include Tuesday's 0.6415-20 (A$2.7 billion) and 0.6525-30 (A$2.2 billion). Additionally, there's a NZD/USD strike at 0.6100 (NZ$1.1 billion) on Tuesday and AUD/NZD strikes at 1.0700 (A$555 million) and 1.0825 (A$833 million). Thursday sees more AUD/NZD strikes at 1.0700 (A$876 million), 1.0850 (A$1.1 billion), and 1.1000 (A$875 million). The largest USD/CAD strike expirations occur on Monday at 1.3775 ($809 million), Tuesday at 1.3500 ($1.2 billion), Wednesday between 1.3590-1.3605 ($1.3 billion), and Friday at 1.3770-85 ($1.1 billion) and 1.3860-70 ($2.1 billion). In USD/JPY, significant strike expirations include Monday's 153.25 ($1.4 billion), 154.00-20 ($1.1 billion), and 155.00 ($1.4 billion), Tuesday's 153.00 ($1.3 billion), Wednesday's 153.50 ($911 million), Thursday's 152.70 ($1 billion) and 155.00 ($1.4 billion), and Friday's 155.00 ($1.2 billion).

CFTC Data As Of 12/04/24

Japanese yen net short position is -165,619 contracts
Swiss franc posts net short position of -36,212 contracts
British pound net long position is 8,619 contracts
Euro net long position is 12,224 contracts
Bitcoin net short position is -363 contracts
Equity fund managers cut S&P 500 CME net long position by 89,326 contracts to 850,042
Equity fund speculators trim S&P 500 CME net short position by 139,497 contracts to 193,791