Daily Market Outlook, June 14, 2024

Munnelly’s Macro Minute…

“BoJ Hesitation Hampers JPY ”

The Bank of Japan surprised the market by announcing a plan to reduce bond buying in the future, but the specifics will be revealed at the next meeting in July. It will continue buying government bonds at the current pace, but details of the tapering plan for the next one to two years will be discussed in July.

Despite gains in Japan's market, MSCI's Asia Pacific index declined due to losses in Australian and Chinese companies. Mainland Chinese stocks continued to decline for the fourth week, prompting calls for policy loosening by the country's central bank. Meanwhile, the S&P 500 set a new record driven by tech stocks, but US stock futures only saw slight gains in Asia. The value of the dollar remained stable relative to other major world currencies.

The G7 leaders will hold their final day of talks on Friday, with China being the main topic before Pope Francis makes a historic appearance to discuss artificial intelligence. The focus will also be on European automakers following the European Commission's decision to impose tariffs on imported Chinese electric vehicles, which China has criticized as protectionist. However, China still faces a tougher stance from the U.S., which leans towards complete separation from China.

The Euro has been facing pressure due to the political uncertainty in Europe following French President Emmanuel Macron's announcement of a snap election in France. Meanwhile, Tesla shareholders have given their approval for CEO Elon Musk's $56 billion pay package, demonstrating the strong support Musk receives from Tesla's retail investors, many of whom are enthusiastic followers of the unpredictable billionaire. Despite resistance from certain major institutional investors and proxy firms, the proposal was successfully passed.

In his press conference BOJ Governor Ueda emphasizes uncertainties and the need for appropriate policy. He reiterates previous policy statements, stating that the current policy is suitable given the economic and price uncertainties. The BOJ plans to announce tapering plans at the next Policy Board meeting, taking into account market conditions and player views. It seems that he is suggesting a slow and gradual process of tapering quantitative easing, and does not rule out future rate hikes when necessary. Regarding foreign exchange, they are monitoring the impact of yen movements on the economy and prices, and are aware of the negative effects of recent yen movements on prices. Governor Ueda is not introducing any significantly new information, and the policy will remain accommodative for now.

Overnight Newswire Updates of Note

Yen Falls As BoJ Say To Specify Bond-Buying Plan Next Month
China’s Rate-Cut Calls Surge, Testing Resolve To Defend Yuan
RBA To Hold Rates Through September, Deliver First Cut In Q4
Reform UK Overtakes PM Sunak's Conservatives In Opinion Poll
France’s Left Unites To Challenge Le Pen, Pres Macron For Power
ANC Say South African Parties Still Discussing Unity Government
Oil’s Run Of Gains Comes To Abrupt Halt On Risk-Off Sentiment
Apple Tops Microsoft In Value After Best 3-Day Run Since 2020
Tesla Investors Back Musk’s $56Bln Pay Deal, Move To Texas

(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: 1.0660-70 (2.51BLN), 1.0700 (1.0BLN), 1.0725 (359M)
1.0750-55 (855M), 1.0795-1.0810 (3.22BLN), 1.0825-30 (821M)
1.0850 (217M), 1.0880-85 (590M), 1.0890-00 (2.54BLN)
1.0925-35 (2.44BLN), 1.0945-50 (2.96BLN)
USD/JPY: 157.00 (461M), 157.25 (689M), 158.00 (745M)
158.25 (314M), 159.00 (415M)
USD/CHF: 0.8750 (600M), 0.9000 (1.8BLN). EUR/CHF: 0.9800 (231M)
GBP/USD: 1.2790-1.2805 (775M). EUR/GBP: 0.8440 (1.13BLN)
AUD/USD: 0.6595-0.6600 (942M), 0.6615-20 (1.44BLN)
0.6640-45 (704M). NZD/USD: 0.6035 (378M)
USD/CAD: 1.3700 (571M), 1.3725-35 (732M), 1.3740-50 (1.63BLN)
1.3760 (1.65BLN), 1.3775-80 (500M) 1.3800-15 (1.68BLN)
EUR/SEK: 11.45 (500M)

CFTC Data As Of 07/06/24

Bitcoin net short position is -1,119 contracts
Swiss Franc posts net short position of -45,763 contracts
British pound net long position is 43,210 contracts
Euro net long position is 67,870 contracts
Japanese yen net short position is -132,101 contracts
Equity fund managers cut S&P 500 CME net long position by 23,186 contracts to 954,821
Equity fund speculators increase S&P 500 CME net short position by 2,269 contracts to 332,326
Gold NC Net Positions up to $237.3K from previous $236.6K