Daily Market Outlook, May 2, 2024

Munnelly’s Macro Minute…

“Recent Data Leaves Powell Boxed In, Further JPY Intervention Eyed”

In Asian trade, equities mostly climbed following remarks from Fed Chair Powell following the latest US Federal Reserve policy meeting. Powell's comments dampened speculation about an imminent interest rate hike, despite acknowledging recent robust data and a halt in disinflation trends. He hinted at continued policy restraint, suggesting that any cuts might take longer than previously anticipated. While his stance was more assertive than the Fed's March update, it fell short of the hawkishness feared by the markets.

Today's data docket lacks significant data releases in the UK. In the Eurozone, attention turns to final April manufacturing PMI estimates, with interest particularly in country-specific breakdowns beyond Germany and France. Initial figures for April showed Eurozone manufacturing PMI dipping to a four-month low of 45.6, underscoring ongoing contraction, while the services PMI signaled a third consecutive month of expansion.

Stateside, focus shifts to March trade figures, factory orders, and weekly jobless claims, though anticipation primarily centers on tomorrow's April labor market report. Recent data have consistently surpassed expectations, notably Q1 employment costs, prompting a scaling back of Fed rate cut predictions for the year, with only one cut fully priced in.

The OECD will unveil its economic outlook report, following its interim report in February highlighting global growth resilience in 2023 but revising down the 2024 forecast to 2.9%. The IMF's projection of 3.2% global growth for 2024 suggests a potential upward revision by the OECD. However, the broader outlook indicates global growth remaining below pre-pandemic averages.

Overnight Newswire Updates of Note

Powell Keeps Rate Cuts On Table, Leaves Timing Less Certain
US Dems Beg For Higher China Tariffs For Swing State Voters
Sec Blinken Pushes For Gaza Cease-Fire Deal In Visit To Israel
China Rejected US Efforts To Resume Talks On Nuclear Arms
BoJ Minutes: Many Saw Need For Yields To Be Set By Markets
Yen Swings Stir Talk That Japan In The FX Market Once Again
Japan Ex-Official: FX Intervention Show 160 Yen Line In Sand
Bank Of Canada’s Macklem Says Getting Closer To Rate Cuts
ECB’s De Cos: Increasingly Sure Inflation Will Slow To 2% Soon
PM Sunak’s Political Fate Hangs On Results Of Local Elections
Apple Set For Big Sales Decline As Investors Await AI In iPhones
Qualcomm Gives Solid Outlook In Sign Of Smartphone Recovery

(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: 1.0600-10 (1.35BLN), 1.0630 720M), 1.0645-50 (648M)
1.0660-65 (1.1BLN), 1.0670-75 (2.09BLN), 1.0680-90 (1.26BLN)
1.0695-00 (2.1BLN) 1.0710-25 (1.46BLN), 1.0745-55 (3.4BLN)
1.0775-85 (3.93BLN)
USD/CHF: 0.8835-50 (1BLN), 0.9000 (346M), 0.9150 (310M)
0.9165 (511M), 0.9225 (1.33BLN), 0.9250 (666M)
EUR/CHF: 0.9600 (1.3BLN), 0.9750 (410M), 0.9775 (570M)
0.9850 (372M)
GBP/USD: 1.2415-25 (506M), 1.2450-65 (652M), 1.2500 (317M)
1.2575-80 (547M)
AUD/USD: 0.6400 (1BLN), 0.6450 (433M), 0.6470-75 (748M)
0.6490-00 (1.5BLN), 0.6520-40 (921M), 0.6550 (521M)
NZD/USD: 0.5960 (782M). AUD/NZD: 1.0850 (348M)
1.0900 (354M)
USD/CAD: 1.3560-65 (502M), 1.3740-50 (729M), 1.3850 (1.16BLN)
USD/JPY 152.50 (1.35BLN), 153.00-10 (472M), 154.20 (402M)
154.75 (300M), 156.05 (662M), 156.75 (625M), 157.20 (310M)
AUD/JPY: 100.00 (565M)
Japan may have intervened in the foreign exchange market by buying yen early on Wednesday, which could be a surprising continuation of their previous action on Monday. This move is expected to slow down the yen's decline and potentially reverse its downward trend. The timing of this intervention aligns with Japan's recent commitment to addressing foreign exchange issues around the clock, showing their willingness to use new strategies to achieve their goals. The U.S. dollar dropped nearly five yen in volatile trading at the end of the New York session, following the Federal Reserve's decision to keep interest rates unchanged and express concerns about inflation. By intervening during the illiquid period between the New York close and the Asian open, Japan may have caught traders off guard and undermined confidence in short-yen positions. Despite the yield differentials and accommodative policy of the Bank of Japan providing support for the dollar, repeated interventions could impact investor sentiment until a shift in fundamentals leads to a reversal in the yen's long-term downtrend. The USD/JPY pair has risen above 156.00 but faces resistance at 156.62, with a potential decline to 152.61.

CFTC Data As Of 26/04/24

Japanese yen net short position is -179,919 contracts
Euro net short position is -9,989 contracts
Swiss Franc posts net short position of -42,562 contracts
British Pound net short position is -26,233 contracts
Bitcoin net position is 0 contracts
Equity fund managers cut S&P 500 CME net long position by 16,969 contracts to 833,074
Equity fund speculators trim S&P 500 CME net short position by 9,927 contracts to 183,864
Gold NC Net Positions: $201.9K vs previous $202.4K