Daily Market Outlook, December 2, 2024
Munnelly’s Macro Minute...
"Euro Hit On Double Whammy Of Trump Dollar Comments & French Crisis Concerns”
The dollar is gaining momentum on Monday, recovering some of the losses from last week, partly due to unusual supportive remarks from the U.S. President-elect Donald Trump. Although 100% tariffs seem unlikely, his latest comments indicate a shift from his previous stance, where he openly advocated for a weaker dollar to address the U.S. trade deficit. The market interpreted this as a sign that he won't exert pressure on the currency. The Chinese yuan reacted negatively, hitting a three-month low against the dollar. The dollar has also risen about 0.5% against the yen, surpassing 150.50 yen per dollar, overshadowing the more hawkish comments from Bank of Japan Governor Kazuo Ueda, who mentioned that the next interest rate hikes are "nearing as economic data is on track." Ueda's remarks, along with data showing Japanese business investment increasing at a robust 8.1% in the third quarter, led markets to estimate a 65% likelihood that the BOJ will raise rates by a quarter point to 0.5% during its policy meeting on December 18-19. This probability is nearly identical to the market's expectation that the Federal Reserve will lower rates by a quarter point at its meeting on December 18, although much will hinge on the results of this week's ISM surveys and payroll data.
After France's far-right National Rally increased the likelihood of a no-confidence vote this week that might overthrow Prime Minister Michel Barnier, French bonds and the single currency are starting the week under pressure. Repairing the budget seems improbable, and the potential deficit of 6% of GDP could make borrowing more expensive for France compared to Greece. The Social Security measure could be the subject of a vote of no confidence by the middle of the week. This week's Euro Area data shows that ULC growth and 3Q GDP compensation per employee should continue to be strong at 4.3% and 4.5% year over year, respectively. Anticipate a slowdown in industrial production in October. ECB speakers include Lagarde, Nagel, Panetta, and Cipollone, who should allude to a probable December cut one week prior to the ECB meeting, emphasising that additional cuts will depend on data.
In the UK, the focus will be on corporate opinion regarding the budget. Markets anticipate that businesses' responses to the budget will be the main focus of this quiet week for releases. The Decision Maker Panel survey should provide an initial understanding of how businesses will handle the increased labour expenses from the budget and how they will divide these costs between increasing prices, reducing potential pay increases, or reducing hiring decisions.
As the Fed currently considers risks to be balanced, data will return to the fore in the US with the November jobs report after weeks of intense political focus. U.S. job growth is anticipated to have bounced back by 195,000 in November, although the forecast range of 160,000 to 270,000 indicates a possibility of a higher-than-expected outcome. For example, JPMorgan is predicting an increase of 270,000, attributing nearly 90,000 of that to the conclusion of hurricanes and strikes. However, they also foresee the unemployment rate rising to 4.2%, closer to the Fed's dot plot of 4.4%, which may keep the option for a December easing open. The primary factor influencing short-term Fed activity is employment. Although there are indications that employment is levelling off, it is challenging to read the current trend because of hurricanes and strikes. The Fed says that balanced risks are coming and that they are ready to halt rate cuts if inflation does not go down or to expedite rate cuts if there is evidence of weakening employment. Next week, employment market risks will be the main topic of discussion.
Overnight Newswire Updates of Note
S&P Sticks With France Rating In Reprieve For PM
Stellantis CEO Tavares Resigns Amid US Challenges, Profit Decline
Trump Threatens BRICS With 100% Tariff Over Dollar Alt Push
Canadian Minister: New Measures Are Imminent After Trump Meeting
China’s 10Y Falls Toward Record 2% On PBoC Easing Bets
China Factory Activity Expands In Nov, Beats Forecasts
Japan Wants To Lift GPIF Real Investment Return Target To 1.9%
Japanese Firms Boost CAPEX In Sign Of Confidence Holding Up
Australia's Central Bank: Risks From Non-Bank Lenders Limited
Australian Retail Strengthen In Positive Sign For Holidays
Putin Approves New Budget With Record Defense Spending
Israeli Strikes Hit Southern Lebanon, But Tense Ceasefire Holds
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0450 (465M), 1.0490-1.0500 (1BLN), 1.0530 (273M), 1.0550 (827M)
1.0575-80 (355M), 1.0590-1.0600 (1.2BLN), 1.0625 (2.3BLN)
EUR/CHF: 0.9270 (445M)
AUD/USD: 0.6500 (403M). NZD/USD: 0.5880 (380M), 0.5980-85 (370M)
AUD/NZD: 1.1100 (1BLN). EUR/AUD: 1.6250 (564M)
USD/CAD: 1.4050 (280M), 1.4080 (317M), 1.4100 (309M)
USD/JPY: 150.50 (705M), 151.00 (261M), 151.50 (235M), 152.00 (590M)
CFTC Data As Of 29/11/24
Equity fund managers raise S&P 500 CME net long position by 60 contracts to 1,079,539
Equity fund speculators trim S&P 500 CME net short position by 29,885 contracts to 258,924
Euro net short position is -42,557 contracts
Japanese yen net short position is -46,868 contracts
Swiss franc posts net short position of -37,071
British pound net long position is 40,315
Bitcoin net short position is -2,084 contracts
Speculators trim CBOT US Treasury bonds futures net short position by 6,123 contracts to 35,645
Speculators increase CBOT US 10-year Treasury futures net short position by 91,701 contracts to 907,502
Speculators increase CBOT US 5-year Treasury futures net short position by 113,816 contracts to 1,983,026
Speculators increase CBOT US 2-year Treasury futures net short position by 23,473 contracts to 1,447,344
Technical & Trade Views
SP500 Bullish Above Bearish Below 5990
Daily VWAP bullish
Weekly VWAP bullish
Below 5990 opens 5800
Primary support 5795
Primary objective 6100
EURUSD Bullish Above Bearish Below 1.05
Daily VWAP bullish
Weekly VWAP bearish
Above 1.05 opens 1.07
Primary resistance 1.0950
Primary objective 1.0380 - TARGET HIT NEW PATTERN EMERGING
GBPUSD Bullish Above Bearish Below 1.2750
Daily VWAP bullish
Weekly VWAP bearish
Above 1.26 opens 1.2750
Primary resistance 1.3050
Primary objective 1.25 - TARGET HIT NEW PATTERN EMERGING
USDJPY Bullish Above Bearish Below 154
Daily VWAP bearish
Weekly VWAP bearish
Below 150 opens 148
Primary support 150
Primary objective is 157.50
XAUUSD Bullish Above Bearish Below 2600
Daily VWAP bearish
Weekly VWAP bullish
Below 2530 opens 2467
Primary support 2530
Primary objective is 2800
BTCUSD Bullish Above Bearish Below 92000
Daily VWAP bullish
Weekly VWAP bullish
Below 91000 opens 87500
Primary support is 85000
Primary objective is 100,000
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!