Daily Market Outlook, March 22, 2024

Munnelly’s Macro Minute…

“Markets Digesting A Bevy Of Central Bank Cross Currents”

Asian equity markets are displaying mixed performance this morning, despite gains seen in European and US markets yesterday. Bank of Japan Governor Ueda stated that the BoJ will allow longer duration bond yields to be determined by markets and may reduce purchases at some point. In a continuation of yesterday's monetary policy update, Bank of England Governor Bailey, in an FT article, indicated that interest rate cuts were under consideration, suggesting that markets are justified in anticipating multiple rate reductions this year.

In today's agenda, newly released UK retail sales data for February showed a 0.2% increase excluding fuel, with overall performance remaining flat. While this is notably less than January's 3.6% monthly surge, it surpassed consensus expectations for a decline, adding to the evidence of a pick-up in economic activity this year. The GfK consumer confidence measure earlier this morning reported no change in its overall reading for March, yet consumers' optimism regarding their future finances reached a two-year high. The CBI industrial trends survey will offer further insights into the UK factory sector conditions in March. While yesterday's manufacturing PMI hinted at stabilization as the overall index hovered just below the 50 expansion/contraction threshold, the February CBI reading indicated a significant decline in orders. Observers await March's data to assess any potential improvement. Additionally, February saw a rise in the selling price index, possibly reflecting supply chain disruptions from issues in the Red Sea. Hence, the latest update will be scrutinized for signs of whether this trend persisted.

The German IFO survey, the final unofficial March update for the Eurozone this week, is anticipated today. Previous ZEW and PMI surveys suggested challenging current economic conditions but also expressed optimism for improvement throughout the year. Similarly, the IFO survey is expected to show a significant rise in the expectations index, albeit with a smaller increase in the current conditions measure.

Stateside, there are no notable data releases scheduled on the docket. However, a couple of Federal Reserve policymakers will provide their perspectives on this week's US monetary policy update. European Central Bank Chief Economist Lane is also slated to deliver a lecture on inflation, likely discussing the ongoing disinflation process in the Eurozone and potentially offering insights on the timing of interest rate adjustments in the region.

Overnight Newswire Updates of Note

Japan CPI Rises As Expected In Feb, Stays Well Above BoJ Target
BoJ Will Eventually Scale Back Bond Buying, Says Gov Ueda
BoJ Watchers See Next Rate Hike By October, Risk Of Faster Moves
RBA: More Borrowers To Feel The Squeeze Than Initially Forecast
New Zealand’s Trade Deficit Narrows To Smallest In 20 Months
German Ifo Outlook Set To Rise, Little Change Exp For View Of Present
BoE’s Bailey Says Rate Cuts ‘In Play’ In Upbeat Take On UK Economy
UK Households Most Upbeat About Personal Finances Since 2021
China’s Yuan Weakens To Four-Month Low After Key Level Breached
BTC On Track For Worst Week In Months As ETF Demand Falters
Biden’s LNG-Permit Halt Challenged By 16 States In Lawsuit
Apple Loses $113 Billion In Value After Regulators Close In
FedEx Beats Estimates As CEO’s Overhaul Plan Gains Traction
Enel Posts 12% Rise In 2023 Core Profit Thanks To Renewables
Netanyahu Would Face Widespread Boycott On Capitol Hill

(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: 1.0850 (EU1.54b), 1.0825 (EU1.33b), 1.0870 (EU1.03b)
USD/JPY: 148.80 ($1.32b), 145.00 ($1.19b), 149.55 ($1.14b)
AUD/USD: 0.6750 (AUD2.59b), 0.6825 (AUD2.56b), 0.6650 (AUD1.68b)
USD/CAD: 1.3480 ($1.22b), 1.3370 ($1.1b), 1.3500 ($836m)
USD/CNY: 7.2200 ($1.21b), 7.1500 ($1.05b), 7.2000 ($809.9m)
NZD/USD: 0.6050 (NZD1.28b), 0.6060 (NZD497.5m), 0.6100 (NZD389m)
GBP/USD: 1.2750 (GBP547.4m), 1.2625 (GBP389m), 1.2700 (GBP350m)
USD/MXN: 17.75 ($453m)
Global easing cycle starts with Swiss National Bank cutting rates by 25bps to 1.5% due to significant CPI undershoot. Bank of Japan finally delivers a rate hike. Bank of England holds rates, but risks of earlier rate cut in June increase. Federal Reserve likely to cut rates in June despite some hawkish signals. Fed Chair Powell remains dovish about inflation reports.

CFTC Data As Of 15/03/24

Bitcoin net short position is -994 contracts
Euro net long position is 74,407 contracts
Japanese Yen net short position is -102,322 contracts
Swiss Franc posts net short position of -17,870
British Pound net long position is 70,451 contracts
Equity fund managers cut S&P 500 CME net long position by 3.983 contracts to 913,990
Equity fund speculators increase S&P 500 CME net short position by 71,149 contracts to 474,044