Daily Market Outlook, June 11, 2024

Munnelly’s Macro Minute…

“Markets Consolidate Ahead Of Wednesday's Data Double Header ”

Asian markets are carefully assessing the impact of right-wing parties' success in the European Union and its potential effects on the bloc's unity. French President Emmanuel Macron attempted to unite left-wing and centrist parties against the right, but has had limited success so far. The first opinion poll indicated that the far-right National Rally party could potentially win the snap election, but may not secure an absolute majority. In Asian markets, Japan, South Korea, and Taiwan saw gains, while China experienced a decline as it faced post-payrolls pressure following a holiday on Monday. The attention of global markets is currently on the forthcoming US CPI inflation data and the Federal Reserve's monetary policy update, both set to be released tomorrow.

The latest UK monthly job market data released today shows a slowdown in activity but continued growth in wages. The overall regular pay growth for the whole economy (excluding bonuses) remained at 6.0% in the three months to April, slightly below expectations. Private sector regular pay growth also decreased to 5.8% from 5.9%. The Bank of England is monitoring these trends closely for any further decline in wage growth. There is some hope for easing pay pressures as the UK unemployment rate rose to 4.4% from 4.3%, surpassing market forecasts, and employment levels fell by 139,000 in the latest three months. Looking ahead, the UK April GDP data will be released tomorrow. After a strong Q1, expect a slight pullback in April with a 0.1% drop in monthly GDP, mainly due to a 0.2% fall in services output. This could lead to softer growth in Q2 compared to Q1.

The focus for the rest of the day in Europe will be on ECB speakers and their outlook following the recent interest rate cut. The timing of the next rate cut remains uncertain, with a July reduction unlikely and a September easing not guaranteed. Among today’s speakers are ECB Chief Economist Lane and France’s central bank Governor Villeroy.

Stateside, the NFIB small business survey will be released later today, with expectations for steady sentiment in May following a rise in April. Preliminary data has indicated high hiring plans but uncertain wage increase plans.

Overnight Newswire Updates of Note

Investors On Tenterhooks For Fed’s Latest Rate-Cut Projections
UN Security Council Adopts US Resolution Backing Gaza Cease-Fire
BoJ Expected To Weigh Bond Buying Cuts, Rate Hike Timing Nears
China Banks Sold Dollars As Yuan Fell To Near Seven-Month Low
Australian Business Confidence Turns Negative, Prices Pick Up
UK PM Sunak Offers Tax Breaks To Landlords In Tory Manifesto
French Far-Right Edges Toward Coalition Against Pres Macron
Bill Gross Says European Bonds Are Becoming More Attractive
Oil Holds Biggest Gain Since March Before OPEC Market Report
Codelco Copper Output Hit By Lingering Effects Of Rock Collapse
Apple Unveils ‘AI For The Rest Of Us’ In Bid To Retake Spotlight
Eli Lilly Alzheimer’s Drug Seen Effective By FDA Advisory Panel

(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: 1.0700 (636M), 1.0750 (350M), 1.0760-70 (714M), 1.0800 (377M)
1.0820-30 (1BLN)
USD/CHF: 0.8950-55 (720M), 0.9000 (301M)
EUR/CHF: 0.9700 (316M), 0.9725 (1.1BLN)
AUD/USD: 0.6615-20 (1.1BLN), 0.6650 (340M), 0.6665-80 (516M)
AUD/CAD: 0.9060 (431M)
USD/CAD: 1.3695-1.3700 (1.2BLN), 1.3755-60 (429M),
USD/JPY: 158.00-10 (420M), 158.25 (259M)
The premiums for EUR/USD FX options saw significant increases on Monday. Despite minimal movement in the FX range, all prices remained at higher levels on Tuesday. The lower EUR/USD spot and concerns about potential further losses and volatility continue to support the market. The demand for option protection remains strong due to the risk of the French election. The benchmark 1-month period includes the reaction to results and is a good indicator of risk. The 1-month implied volatility increased by 1.0 from Friday's low of 6.2, reaching the highest level since April. The 1-month risk reversals show EUR puts over calls at 0.15 to 0.55, the highest level since April. Buyers are acquiring downside strikes outright using risk reversals and RKO options.

CFTC Data As Of 07/06/24

Bitcoin net short position is -1,119 contracts
Swiss Franc posts net short position of -45,763 contracts
British pound net long position is 43,210 contracts
Euro net long position is 67,870 contracts
Japanese yen net short position is -132,101 contracts
Equity fund managers cut S&P 500 CME net long position by 23,186 contracts to 954,821
Equity fund speculators increase S&P 500 CME net short position by 2,269 contracts to 332,326
Gold NC Net Positions up to $237.3K from previous $236.6K