Daily Market Outlook, June 7, 2024

Munnelly’s Macro Minute…

“US Jobs Data To Wrap The Week”

Equity performance across the Asian region is mixed ahead of today’s US nonfarm payrolls report, though most markets are on track to end the week positively. Recent trade data from China revealed a larger-than-expected trade surplus in May, driven by a stronger-than-anticipated increase in exports and a slower rate of import growth. This outcome bolsters hopes that China can sustain its growth momentum.

At its meeting yesterday, the European Central Bank (ECB) decided to cut interest rates by 25bps, bringing the deposit facility rate down to 3.75%. Additionally, the ECB reduced the main refinancing rate and the marginal lending rate by 25bp each, to 4.25% and 4.50% respectively. This marks the first rate reduction since 2019, following nine months of steady rates. The decision was widely anticipated, as policymakers had signaled the move in advance. The ECB is now the second G7 central bank to reduce rates, following the Bank of Canada's decision. Meanwhile, the Bank of England and the US Federal Reserve have not yet started cutting rates, and the Bank of Japan has raised rates this year.The ECB provided no definitive signals about future policy changes, maintaining a data-dependent stance and noting that “the Governing Council is not pre-committing to a particular rate path.” This suggests that another rate cut next month is unlikely, especially after recent data indicated persistent wage growth and high services price inflation in the Eurozone. Markets now expect the next rate cut to occur in either September or October. Today, several ECB officials, including Nagel, Simkus, Holzmann, Schnabel, Centeno, and President Lagarde, are scheduled to speak, which will attract market attention as participants try to gauge future policy directions.

The focus today is on the US monthly labour market report for May. The April report showed signs of a slowdown in the jobs market, with the economy adding only 175,000 jobs, an increase in the unemployment rate to 3.9%, and a moderation in average hourly earnings growth to 3.9% year-on-year. For May, expect an increase in nonfarm payrolls to 225,000, with the unemployment rate and annual wage growth remaining steady at 3.9%. Unless there is a significant surprise, the US data is likely to support the Fed's current stance of maintaining interest rates at their current levels for a while longer.

In other economic news, the final Eurozone Q1 GDP print is expected to confirm growth of 0.3% quarter-on-quarter. Additionally, the Canadian labour market report for May is forecast to show a further increase in the unemployment rate.

Overnight Newswire Updates of Note

JPMorgan, Citi Cling To July Fed Rate-Cut Bets Ahead Of Jobs Data
ECB Officials All But Rule Out July Cut With September Unclear
Some ECB Hawks Regret Premature Cut Commitment, Sources Say
Ukraine Ready For EU Membership Talks, Brussels Says
China Exports Surge In May, Trade Balance Grows While Imports Shrink
Japan’s Suzuki Says To Consider The Effectiveness Of Intervention
Japan FinMin Jawboning Pre-US Jobs Report, Warning To Specs
Japan’s Households Boost Outlays First Time In 14 Months
A Majority Of BoJ Watchers Expects Cut In Bond Buying Next Week
Moody’s May Cut Six US Banks On Commercial Real Estate Exposure
Japan's MUFG, SMFG To Sell More Than $8.5 Billion Of Toyota Shares
Mexican Peso Tumbles As Ruling Party Vows To Pass Reform
Netanyahu Invited To Address Both Houses Of Congress On July 24
Qatar ForMin: Hamas Has Not Responded To Latest Ceasefire Proposal

(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: 1.0795-1.0800 (897M), 1.0850 (532M), 1.0875-85 (3.3BLN)
1.0895-1.0900 (2.3BLN), 1.0920-30 (716M), 1.0940-50 (1.1BLN)
USD/CHF: 0.8900 (520M),0.8915 (300M), 0.8925 (1.2BLN), 0.9000 (846M)
EUR/CHF: 0.9700-10 (450M), 0.9850 (526M)
EUR/GBP: 0.8500 (200M), 0.8530 (257M)
GBP/USD: 1.2695 (315M), 1.2800 (645M)
AUD/USD: 0.6600 (1.2BLN). NZD/USD: 0.6100-15 (1.3BLN)
USD/CAD: 1.3675-80 (1.2BLN), 1.3720-30 (1.1BLN), 1.3745-50 (675M)
1.3800 (2.8BLN)
USD/JPY: 154.50 (1.1BLN), 155.00 (487M), 156.00-05 (560M), 156.25 (350M)
156.50 (860M), 157.00 (1.3BLN), 157.25 (500M)
EUR/JPY: 167.50 (800M). EUR/NOK: 11.45 (230M)

CFTC Data As Of 31/05/24

Japanese yen net short position is -156,039 contracts
Euro net long position is 57,572 contracts
Swiss franc posts net short position of 44,366 contracts
British pound net long position is 25,402 contracts
Bitcoin net short position is -756 contracts
Equity fund managers raise S&P 500 CME net long position by 31.431 contracts to 978,007
Equity fund speculators increase S&P 500 CME net short position by 12,145 contracts to 330,057
Gold NC Net Positions increased to $236.6K from previous $229.8K