Daily Market Outlook, June 20, 2024

Munnelly’s Macro Minute…

“Asian Markets Soggy On Tech Doubts. BoE On Deck”

Asian stocks weakened as investors weighed the sustainability of the recent surge in technology, which had driven a major benchmark to over two-year highs. The weakest regional equities were Chinese and Japanese markets. The Hang Seng Tech Index fell over 1%, reflecting weakness in the region's technology stocks. The People's Bank of China's setting of the Yuan's daily reference rate was the weakest since November, suggesting a potential relaxation of monetary policy.

British inflation may have reached the Bank of England's 2% target for the first time in almost three years, potentially leading to a cut in interest rates by the Bank of England. However, the central bank remains concerned about wage growth and underlying pricing pressure, emphasizing that a return of inflation to its target is not sufficient on its own to warrant cutting interest rates. May's data revealed that annual consumer price inflation slowed to 2% from April's 2.3%, while services price inflation, seen as a better indicator of medium-term inflation risk by the BoE, was at 5.7%, surpassing estimates. This mixed picture leaves Bank of England Governor Andrew Bailey with little choice but to wait, as markets are only fully pricing in a rate cut in November. While Bailey had hinted at a potential rate cut early last month, recent data has been less convincing.

European investors will be watching French markets following the European Commission's announcement on Wednesday that France, along with six other countries, will face consequences for exceeding EU budget deficit limits. French stocks and the euro have been experiencing pressure due to political instability in France and the potential for a parliament dominated by far-right parties, following President Emmanuel Macron's decision to call for a snap vote.

Stateside jobless claims are the data point for the afternoon along with Central Bank speakers Kashkari and Barkin who speak later in the US session.

Overnight Newswire Updates of Note

Chinese Banks Hold Lending Rates Following PBoC’s Caution
China Loosens Grip On Yuan With Weakest Fixing Since November
PBoC’s New Tools May Spur Big Shift In How It Manages Money
New Zealand’s Economy Emerges From Recession In First Quarter
BoE Rate Cut Expected To Be Pushed Back By Election And Inflation
Brazil CenBank Pauses Cycle Of Interest Rate Cuts In Unanimous Decision
Australian Dollar Gathers Strength As RBA Tone Leans Hawkish
Oil Steadies Ahead Of US Stockpile Data As Volatility Declines

(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: 1.0650 (570M), 1.0665-75 (650M), 1.0690-00 (2.6BLN)
1.0705 (436M), 1.0725-30 (1.05BLN), 1.0745-50 (1.05BLN)
1.0760-75 (1.05BLN), 1.0800 (1.4BLN, 1.0855-60 (1.2BLN)
USD/CHF: 0.8815-20 (810M), 0.8850 (912M), 0.8880-90 (432M)
0.8900 (530M), 0.8925 (300M)
EUR/CHF: 0.9550 (366M), 0.9630 (620M), 0.9790 (604M)
GBP/USD: 1.2700 (1.05BLN), 1.2715-20 (544M), 1.2750 (350M)
1.2800 (284M)
EUR/GBP: 0.8450-55 (580M), 0.8475 (350M), 0.8500 (670M)
AUD/USD: 0.6500 (1.5BLN), 0.6525-35 (708M), 0.6550-60 (344M)
0.6570 (533M), 0.6590-00 (446M), 0.6645-65 (911M)
0.6680-90 (680M), 0.6770 (545M)
NZD/USD: 0.6080 (462M), 0.6100 (320M), 0.6125 (268M)
AUD/NZD: 1.0925 (652M)
USD/CAD: 1.3645-50 (376M), 1.3660-65 (744M)
USD/JPY: 156.00 (1.3BLN), 156.90-05 (3.22BLN), 157.25-30 (376M)
157.50 (350M), 157.75 (534M), 158.00 (621M)
USD/ZAR: 17.50 (851M), 18.00-05 (1.41BLN)

CFTC Data As Of 14/06/24

Equity fund speculators increase S&P 500 CME net short position by 20,612 contracts to 352,937
Equity fund managers raise S&P 500 CME net long position by 13,149 contracts to 967,970
Euro net long position is 43,644 contracts
Japanese yen net short position is 138,579 contracts
British pound net long position is 52,121 contracts
Swiss franc posts net short position of -42,863
Bitcoin net short position is -1,138 contracts