Daily Market Outlook, May 28, 2024

Munnelly’s Macro Minute…

“US & UK Back Online, Month End & Inflation Data Eyed”

On Tuesday, Asian markets saw a second day of gains as the dollar weakened in anticipation of upcoming inflation reports that could impact global monetary policy. The MSCI AC Asia Pacific index rose, led by gains in Hong Kong stocks, while US and European equities futures markets remained strong. Investors were considering the possibility of a US interest rate cut.

As May comes to an end, there is a packed data schedule with the U.S. PCE price index and China PMIs taking the lead, along with a lineup of central bank speakers and month-end rebalancing flows that will impact the markets.

The markets in the U.S. and UK were closed on Monday. In the U.S., the data calendar for the upcoming week includes the May consumer confidence, the second estimate of Q1 GDP, the Fed Beige Book, the core PCE price index, and Chicago PMI. Several Fed officials including John Williams, Neel Kashkari, and Raphael Bostic are scheduled to speak during the week.

BOJ board member Seiji Adachi is set to deliver a speech and news conference in Japan. Key data highlights from Japan include services PPI, Tokyo May core CPI, April employment, industrial production, and retail sales.

In the Eurozone, important data releases include flash May HICP, consumer confidence and sentiment indices, the German Ifo business climate survey, and CPI. ECB chief economist Philip Lane will be delivering a speech on inflation in the Eurozone on Monday. There are no major data releases scheduled in the UK, with Bank of England Governor Andrew Bailey's speech on Thursday being the only potential event of significance.

China is set to publish industrial profits on Monday and official May PMIs on Friday. The PMIs will be closely monitored for any indications of an increase in factory and services activity following a slowdown in April.

The latest ECB inflation expectations survey will have a significant impact on the upcoming European Central Bank meeting, where interest rates are expected to be cut. The Eurozone CPI report for May is forecasted to show a small rise in inflation, which argues for caution. In the US, consumer confidence measures have been declining, possibly due to concerns about inflation. Despite some positive news from the University of Michigan survey, consumer sentiment is still down for the month. Today's Conference Board indicator is also expected to show a decline, raising questions about its impact on consumer spending.

Overnight Newswire Updates of Note

Australian Retail Sales Failed To Spring Back In April
Australia’s Spike In Young Unemployed Signals Weaker Job Market
Jump In Japan’s Business Service Prices Supports BoJ Hike Case
RBNZ To Introduce Mortgage Restrictions As Debt, Home Prices Climb
UK Shop Inflation Back To ‘Normal’ Levels As Election Draws Near
USD/JPY Falls From 157.00 As US Dollar Meets Fresh Supply
Oil Steadies As Geopolitical Tensions Rise Before OPEC+ Meeting
China Stocks Eye Gains; Traders Await CPI Reports

(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: 1.0770 (270M), 1.0790-00 (703M), 1.0825 (338M)
1.0850-60 (980M), 1.0870-75 (1.11BLN), 1.0900-10 (2.5BLN)
1.0980-85 (703M)
USD/JPY: 155.50 (1.12BLN), 155.90-10 (1.05BLN), 156.45-50 (555M)
157.75 (280M), 158.00 (600M)
USD/CHF: 0.9050 (800M)
AUD/USD: 0.6615-25 (461M), 0.6650 (933M), 0.6725 (523M)
NZD/USD: 0.6050 (307M), 0.6110-15 (321M)
Japan's Finance Minister Suzuki has once again started verbally intervening in the foreign exchange market, expressing the desire for stable FX rates. He is closely monitoring FX movements but refraining from commenting on actual market interventions as a general practice. The focus is currently on the negative impacts of a weak yen. Japanese officials are feeling more confident after the recent G7 approval of FX measures. Although the market has been relatively stable recently, there are no plans for new interventions at this time.

CFTC Data As Of 24/05/24

Japanese Yen net short position is -144,367 contracts
British Pound net long position is 1,053 contracts
Euro net long position is 41,475 contracts
Bitcoin net short position is -890 contracts
Swiss Franc posts net short position of 40,645 contracts
Equity fund managers raise S&P 500 CME net long position by 25,714 contracts to 946,576
Equity fund speculators increase S&P 500 CME net short position by 38,575 contracts to 317,912
Gold NC Net Positions: $229.8K vs $204.5K