Daily Market Outlook, July 1, 2024

Munnelly’s Macro Minute…

“Le Pen In The Lead In French Elections, UK Voters On Deck Next ”

The French parliamentary election showed a significant shift in politics, with Le Pen's Rassemblement National leading the first round with 33.5% of the vote, outpacing the leftist bloc and Macron's alliance. The voter turnout was notably high at 65.8%, a substantial increase from 47.5% in 2022. Le Pen's party is close to achieving a majority in the second round on July 7, with projections of securing between 230 to 280 seats in the 577-seat assembly. The final outcome will depend on candidates dropping out and whether the high first-round turnout translates into second-round votes. Markets may feel relief as the results align with pre-voting polls, but the focus is now on potential alliances and policy compromises by the centrists to win back disgruntled voters in the coming week.

The upcoming week will be filled with significant events, including elections in the UK, important data releases such as U.S. payrolls, and speeches by key figures like Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde. This is likely to lead to a volatile start to July.

The ECB Forum on Central Banking will feature speeches by Powell, Lagarde, and other ECB officials, as well as New York Fed President John Williams. The U.S. data calendar includes ISM manufacturing PMI, JOLTS job openings, ADP employment, factory orders, ISM services PMI, and the release of the June 11-12 Fed meeting minutes. Non-farm payrolls are due on Friday, with a Reuters poll predicting 195,000 headline jobs created in June and an unchanged unemployment rate of 4%.

France's legislative election may cause market volatility on Monday, especially if there is a shift to the left. In Europe, key data includes final June PMIs, flash HICP, May unemployment and retail sales, German CPI, and industrial production. The UK will hold an election on Thursday, with the Labour Party expected to win according to polls. Any reaction to a Labour government is expected to be minimal. Japan's Q2 Tankan survey is the only significant release in a quiet week for data. The Reserve Bank of Australia's June meeting minutes, as well as retail sales and trade data, are also due for release.

Overnight Newswire Updates of Note

France’s Far-Right Make Huge Gains In Nationwide Poll
China's Manufacturing PMI Remains Flat In June
Big Manufacturers' Sentiment Highest Level Since March 2022 - BoJ Tankan
South Korea S&P Global June Manufacturing PMI At 52.0 (Vs 51.6 In May)
Boeing Agrees Deal To Buy Spirit Aerosystems - RTRS
Euro, French Bonds Seen Higher Following France National Ballot
North Korea Fired A Suspected Ballistic Missile Eastward - Yonhap
Gold Holds Ground On US Rate-Cut Expectations
Australian Judo Bank PMI Mfg Jun F: 47.2 (prev 47.5 )

(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: 1.0685 (1.8BLN), 1.0700 (2.9BLN), 1.0730-40 (1.2BLN), 1.0750 (572M)
1.0755-65 (806M), 1.0775 (334M), 1.0800 (363M), 1.0820 (312M)
USD/CHF: 0.8950-60 (830M), 0.9000 (267M), 0.9070 (801M)
EUR/CHF: 0.9600 (514M), 0.9725 (300M). EUR/GBP: 0.8520 (335M)
GBP/USD: 1.2620 (300M), 1.2750 (271M). NXD/USD: 0.6100 (235M)
AUD/USD: 0.6625 (329M), 0.6555-65 (280M), .6690-0.6700 (337M), 0.6750 (694M)
USD/JPY: 159.50 (1.2BLN), 160.50-55 (1BLN), 161.00 (396M)
EUR/JPY: 170.25 (250M)

CFTC Data As Of 25/06/24

Euro net short position is -8,431 contracts
Japanese Yen net short position is -173,900 contracts
Swiss Franc posts net short position of -35,057 contracts
British Pound net long position is 44,048 contracts
Bitcoin net short position is -624 contracts
Equity fund managers raise S&P 500 CME net long position by 17,079 contracts to 977,134
Equity fund managers raise S&P 500 CME net long position by 17,079 contracts to 977,134