Daily Market Outlook, May 16, 2024

Munnelly’s Macro Minute…

“Markets Buoyant With Goldilocks Inflation & Retail Sales Data”

Equity markets in the Asia-Pacific region continued to rise, reflecting the positive momentum in US and European markets. The latest US data, which showed a slow start to Q2 for retail sales and no surprises in April CPI inflation, played a key role in this trend. As a result, there is now a growing expectation of Fed rate cuts later in the year, with two quarter-point reductions already being fully accounted for.

Looking ahead, there are no major data releases from the UK or Eurozone today. Market attention remains focused on analyzing yesterday's US CPI inflation and retail sales figures to assess their impact on monetary policy expectations. These data have eased concerns about a resumption of Fed interest rate hikes, potentially strengthening the current stance of maintaining rates at their current levels while waiting for further data.

In the US, today's data releases include industrial production, housing starts, and building permits for April. A modest 0.2% increase in industrial production is expected, along with a rebound in housing activity following a lackluster performance in March. The release of the Philadelphia Fed manufacturing survey for May is also eagerly anticipated, particularly after the softer-than-expected outcome of yesterday's NY Empire State manufacturing survey. The US weekly jobless claims numbers will also receive significant attention following last week's spike to 231k, the highest since August. A sustained increase could indicate a cooling labor market.

Central bank speakers scheduled for today include the Bank of England's Greene, who will discuss the UK labor market. Her voting history and previous comments suggest a hawkish stance. Four regional Fed heads: Thomas Barkin, Raphael Bostic, Loretta Mester, and Patrick Harker. Additionally, Fed Vice Chair for Supervision Michael Barr will testify before the Senate. European Central Bank (ECB) speakers include Vice President Luis de Guindos, Bank of Spain Governor Pablo Hernandez de Cos, and Bank of Portugal Governor Mario Centeno.

Overnight Newswire Updates of Note

Fed’s Goolsbee Praises Disinflation, Says More Progress Is Needed
US Inflation Data Accidentally Released 30 Minutes Early, BLS Says
China Recovery Likely Picked Up With Outlook Buoyed By Stimulus
Japan Economy Sputters As Dismal Run Extends To Three Quarters
RBA’s Hunter Warns Of No ‘Quick Fix’ To Australia’s Housing Crisis
Australia Unemployment Rises As More Workers In-Between Jobs
Oil Advances On US Stockpile Decline And Broader Risk-On Mood
Cisco Gives Upbeat Forecast In Sign Of Network Spending Pickup
GameStop, AMC Shares Drop As Raucous Meme Rally Evaporates

(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)

FX option strikes expire at 10-am New York/3-pm London - Thursday May 16
EUR/USD: 1.0820-25 (1.7BLN), 1.0845-50 (2.2BLN), 1.0875 (1.7BLN)
1.0900 (1.6BLN), 1.0915-20 (1.9BLN)
USD/CHF: 0.9025 (464M), 0.9060-70 (429M), 0.9080 (396M), 0.9100 (702M)
EUR/CHF: 0.9675 (334M), 0.9710 (200M)
GBP/USD: 1.2600 (643M), 1.2605-15 (713M)
EUR/GBP: 0.8575-80 (528M)
AUD/USD: 0.6600 (1.1BL), 0.6625-30 (608M), 0.6640-50 (1.1BLN), 0.6725 (507M)
NZD/USD: 0.6000 (674M), 0.6040 (347M)
USD/JPY: 153.00 (1.9BLN), 153.50 (587M), 153.80-85 (1BLN), 154.00 (770M)
154.40 (500M), 155.00-05 (1.7BLN), 156.00 (661)
EUR/JPY: 169.00 (400M), 169.40 (400M), 158.00 (560M)

CFTC Data As Of 10/05/24

British pound net short position is -21,813 contracts
Euro net long position is 4,590 contracts
Japanese yen net short position is -134,922
Swiss franc posts net short position of -41,787
Bitcoin net short position is -783 contracts
Equity fund speculators increase S&P 500 CME net short position by 69,524 contracts to 238,456
Equity fund managers raise S&P 500 cme net long position by 44.751 contracts to 860,694
Gold NC Net Positions: $199.6K vs previous $204.2K