Daily Market Outlook, April 2, 2024
Munnelly’s Macro Minute…
“Markets Return To An Uncertain US Rate Cut Narrative”
Asian equity indices are treading cautiously as they assess the potential timing and extent of US Fed rate adjustments. Yesterday saw a decline in US stocks and a selloff in Treasury bonds, notably spurred by the ISM manufacturing index surpassing the 50-point mark for the first time since September 2022, hinting at expansion. Eyes are now on Friday’s US monthly labor market data, while Fed Chair Powell's upcoming speech on Wednesday is eagerly anticipated.
The British Retail Consortium (BRC) shop price index, released overnight, hinted at March's inflation trends. It showed a decrease to 1.3% from February's 2.5%, marking the lowest since 2021. This decline was mirrored in both food and non-food inflation, according to the BRC data. Today's focus in the UK will be on money and credit data, offering insights into lending conditions, particularly regarding the housing market, speculated to be picking up with the presumed peak in interest rates. Additionally, the March manufacturing PMI, though a second reading, is expected to remain just below the 50 threshold at 49.9.
In Europe, attention centers on Germany's preliminary estimate of March CPI inflation ahead of tomorrow's Eurozone flash estimate. Forecasts suggest Eurozone headline CPI will remain at 2.6%, with core inflation dipping to 3.0%, the lowest in nearly two years. French and Italian data released earlier hint at potential downside risks to the Eurozone's outcome. The ECB’s consumer expectations survey this morning, featuring inflation expectations for both one and three years ahead, will be scrutinized by policymakers. Additionally, the Eurozone manufacturing PMI's final reading is expected to confirm contraction in contrast to growth in services.
Stateside, focus lies on the latest factory orders and speeches from several Fed officials. Recent Fed commentary has been mixed, with Chair Powell suggesting no rush to cut interest rates, yet a first reduction in June remains probable if inflation data align with expectations. Uncertainty shrouds potential follow-up moves in the latter half of the year.
Overnight Newswire Updates of Note
NY Fed's inflation gauge sees reduced price pressures in February.
There is a surge in long dollar bets as funds connect the dots.
Japan issues a warning about taking action against excessive yen volatility.
The JP Mar Monetary Base Year-on-Year expansion is at a slower pace.
Chinese state banks sell dollars as yuan hits a 4 ½-month low.
The Reserve Bank of Australia (RBA) did not discuss raising rates at the March meeting, according to the minutes.
RBA's Kent suggests a shift to an ample reserve system to set rates, with repo rates near OCR.
The outlook for inflation and policy remains uncertain, according to Kent.
In the UK, inflation in shops drops to the lowest level in two years, as reported by Guardian and FT.
A study by the Swiss National Bank (SNB) calculates the cost of intervention to curb franc gains.
(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: EUR amounts
1.0735 1.3b
1.0750 582m
1.0800 1.3b
GBP/USD: GBP amounts
1.2600 400m
USD/JPY: USD amounts
151.15 1.4b
152.50 863m
153.00 1.1b
AUD/USD: AUD amounts
0.6500 2.3b
CFTC Data As Of 29/03/24
Japanese Yen net short position is -129,106 contracts.
Euro net long position is 31,194 contracts.
British Pound net long position is 35,170 contracts.
Swiss Franc posts net short position of -21,968 contracts.
Bitcoin net short position is -1,075 contracts.
Technical & Trade Views
SP500 Bullish Above Bearish Below 5250
Daily VWAP bullish
Weekly VWAP bullish
Below 5190 opens 5160
Primary support 5160
Primary objective is 5300
EURUSD Bullish Above Bearish Below 1.08
Daily VWAP bearish
Weekly VWAP bearish
Below 1.0690 opens 1.0630
Primary support 1.0690
Primary objective is 1.0540
GBPUSD Bullish Above Bearish Below 1.27
Daily VWAP bearish
Weekly VWAP bearish
Below 1.2570 opens 1.2510
Primary support is 1.2500
Primary objective 1.29 (Potential Objective Change Developing)
USDJPY Bullish Above Bearish Below 150.25
Daily VWAP bullish
Weekly VWAP bullish
Above 151 opens 152
Primary support 145.85
Primary objective is 153
AUDUSD Bullish Above Bearish Below .6570
Daily VWAP bearish
Weekly VWAP bearish
Below .6460 opens .6420
Primary support .6477
Primary objective is .6700 (Potential Objective Change Developing)
BTCUSD Bullish Above Bearish below 65000
Daily VWAP bearish
Weekly VWAP bullish
Below 64000 opens 59588
Primary support is 52800
Primary objective is 78000
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!