Daily Market Outlook, March 25, 2024

Munnelly’s Macro Minute…

“Nikkei Retreats Into A Holiday Shortened Week”

On Monday, Asian stock markets are trading with a mix of results, influenced by the global market trends from Friday. Some traders are considering taking profits from the recent market strength. There is also a sense of optimism regarding the future of interest rates after the US Fed's recent monetary policy announcement. Although the exact timing of the first rate cut is still uncertain, there has been a resurgence in the likelihood of a quarter point rate cut in June. The Fed has upheld its projection for three interest rate cuts in the current year.

The upcoming week is expected to be relatively quiet for markets, with many centers observing holidays towards the end of the week. The focus will be on the U.S. February PCE price data, following a busy week of central bank meetings and important economic data. Key U.S. data releases include durable goods, final Q4 GDP, consumer confidence, Chicago PMI, University of Michigan consumer sentiment, and housing data such as new and pending home sales, and CaseShiller house prices. Additionally, speeches by Federal Reserve Governors Lisa Cook and Christopher Waller, along with a discussion with Chair Jerome Powell, will attract attention after the dovish tone of last week's Fed meeting.

In Europe, the focus will be on business climate, consumer inflation expectations, and final March consumer confidence. Germany will publish retail sales and unemployment data, while the UK's main release will be Q4 GDP. Later today, BoE member Catherine Mann is scheduled to speak at the Royal Economic Society’s annual conference. Market participants will closely monitor her speech for any hints regarding the duration she expects Bank Rate to be maintained at its current level. However, considering that Ms. Mann withdrew her advocacy for higher rates only at the March meeting, it's probable that she will suggest it's premature to consider reducing Bank Rate at this stage, based on her perspective.

In Japan, investors will be monitoring the Bank of Japan's summary of opinions from board members at its March 18-19 policy meeting, as well as the release of the closely watched Tokyo CPI for March, unemployment rate, industrial production, and retail sales. The Japanese stock market experienced a notable decrease overnight after four consecutive days of gains. The Nikkei 225 index is dropping below the 40.6k handle, influenced by varied signals from international markets on Friday. The decline is evident across multiple sectors, particularly impacting exporters and financial companies.

China's release of the NBS March manufacturing and non-manufacturing PMIs, along with data on industrial profits, will also be closely awaited after recent activity indicators raised hopes of an economic recovery.

Overnight Newswire Updates of Note

BoJ Board Agrees Chance Of Meeting Inflation Target Rising Gradually
Japan's Kanda: Yen Weakness Doesn't Reflect Fundamentals
China Blocks Use Of Intel And AMD Chips In Government Computers
Fed’s Powell Ready To Support Job Market, Even If It Means Lingering Inflation
Bank Of England Inches Closer To Rate Cuts As Hawks Retreat
Putin Says Gunmen Who Raided Moscow Concert Hall Tried To Escape To Ukraine
Putin Says Gunmen Who Raided Moscow Concert Hall Tried To Escape To Ukraine
Oil Snaps Three-Day Drop As Russia Attacks Add To Global Tension
Houthis Fired Missile At Chinese-Owned Ship In Red Sea, US Says

(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: 1.0850 (EU1.04b), 1.0780 (EU722.5m), 1.0900 (EU704.6m)
USD/JPY: 147.00 ($1.41b), 150.00 ($1.19b), 145.50 ($800m)
USD/BRL: 5.0000 ($1.12b), 4.5500 ($750m), 6.3000 ($711.6m)
AUD/USD: 0.6565 (AUD527.4m), 0.6500 (AUD327.1m)
USD/CAD: 1.3500 ($950.7m), 1.3485 ($844.2m), 1.3700 ($657.7m)
USD/CNY: 7.1000 ($842.7m), 7.1950 ($446.4m), 7.0345 ($400m)
GBP/USD: 1.2716 (GBP398.2m), 1.2825 (GBP361.9m)
NZD/USD: 0.6195 (NZD414.9m)
USD/MXN: 16.90 ($516.9m), 17.30 ($352.6m)
EUR/GBP: 0.8590 (EU408.6m)

CFTC Data As Of 22/03/24

Bitcoin net short position is -2,096 contracts
Euro net long position is 48,342 contracts
Japanese Yen net short position is -116,012 contracts
Swiss Franc posts net short position of -20,500 contracts
British Pound net long position is 53,200 contracts
Equity fund speculators trim S&P 500 CME net short position by 57,268 contracts to 416,777
Equity fund managers raise S&P 500 CME net long position by 35.431 contracts to 949,421