Daily Market Outlook, March 28, 2024
Munnelly’s Macro Minute…
“Markets Await Holiday US PCE Data & Powell Speech”
Asian stock markets are experiencing a mix of trading on Thursday, as they respond to the generally positive trends in global markets from the previous day. Some traders are taking profits following the recent market strength, while also waiting cautiously for key US inflation data and Fed Chair Jerome Powell's speech, as the markets will be closed on Good Friday. At the same time, there is an optimistic atmosphere as several central banks are expected to begin cutting rates in the second half of the year. The Asian equity gauge saw minimal changes as gains in Hong Kong and mainland Chinese equities balanced out losses in Japan.
The UK's Q4 GDP growth data, which was released earlier today, remained unchanged, confirming a 0.3% quarter-on-quarter contraction. This decline represents the second consecutive quarterly decrease following a 0.1% drop in Q3, officially indicating a technical recession. However, recent business surveys present a more positive outlook, suggesting that the economy may already be showing signs of improvement. Bank of England Monetary Policy Committee (MPC) member Haskel, who is one of the two remaining policymakers advocating for interest rate hikes but has recently shifted to the no-change camp, cautioned that wage growth still appears to be too elevated. He expressed a preference for a gradual rather than swift approach to any potential rate cuts. Haskel's remarks stand in contrast to Governor Bailey's recent indication that all MPC meetings are "in play," suggesting openness to potential changes in interest rates.
In the Eurozone, today's releases of the M3 money supply and German jobless claims figures are expected to garner relatively little attention. However, market focus will likely be on speeches by ECB policy makers Panetta and Villeroy, as they lay the groundwork for potential interest rate cuts, anticipated to occur in June. Eyes will then turn to Friday's release of the latest March CPI inflation figures from France and Italy, which will be closely monitored ahead of next week's estimates for Germany and the Eurozone as a whole. The early timing of Easter this year may introduce some volatility, but markets will be seeking evidence to support recent comments by ECB President Lagarde, who suggested that the decline in inflation is likely to persist.
Later today, the US is set to release its latest update for Q4 GDP, with expectations that it will remain unrevised at 3.2% (annualized). However, the spotlight will be on Friday's release of the personal consumption expenditure (PCE) deflator, which serves as the Federal Reserve's preferred inflation gauge. Following recent unexpected increases in inflation, markets will closely monitor the core deflator, excluding energy and food prices. In February, the seasonally adjusted month-on-month change for the core deflator is anticipated to hover between 0.3% and 0.4%, look for a 0.4% increase compared to the consensus median forecast of 0.3%. The year-on-year rates for both headline and core PCE inflation are expected to slightly rise to 2.5% and 2.9%, respectively. Despite these modest inflation surprises, the Federal Reserve appears undeterred, maintaining its trajectory towards potential interest rate cuts, possibly by mid-year. Federal Reserve Chair Powell is slated to speak tomorrow, offering further insights into the central bank's stance.
Overnight Newswire Updates of Note
Fed’s Waller Says No Rush To Cut Interest Rates
BoJ Policy Shift Not Yet A Turning Point For Japan's Economy
BoJ Policymakers Saw Need To Go Slow In Future Rate Hikes
BoE Rate-Setter Warns Against Rushing To Cut Interest Rates
China’s Property Crisis Is Rippling Through Its Biggest Banks
Australian Retailers Shake Off Malaise With A Little Help From Taylor Swift
Australia Job Vacancies Fall 6.1% In Feb Quarter As Demand Cools
Dollar Firm After Fed Comments; Yen Under Close Watch
Japan’s Bonds Saw Most Outflow In 14 Months In Historic BoJ Week
Oil Prices Advance As Investors Reassess US Inventories Data
(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)
USD/JPY: 150.50 ($2.85b), 150.00 ($1.5b), 152.15 ($1.24b)
EUR/USD: 1.0840 (EU1.53b), 1.0825 (EU1.46b), 1.0700 (EU1.2b)
USD/BRL: 4.9000 ($2.48b), 4.9500 ($2.02b), 4.8500 ($1.56b)
USD/CNY: 7.2500 ($1.15b), 7.3700 ($971.4m), 7.1800 ($619.7m)
USD/CAD: 1.3600 ($1.31b), 1.3435 ($851m), 1.3625 ($744.2m)
GBP/USD: 1.2600 (GBP1.15b), 1.1800 (GBP1.14b), 1.2700 (GBP484.7m)
AUD/USD: 0.7025 (AUD455.9m), 0.7200 (AUD354.2m), 0.6375 (AUD340m)
USD/MXN: 18.00 ($678.3m)
EUR/GBP: 0.8600 (EU301.2m)
NZD/USD: 0.6125 (NZD395.1m), 0.6098 (NZD300.1m)
Credit Agricole Month End Model: Our FX month-end rebalancing model suggests potential mild USD selling across various currencies, with the strongest sell signal observed against the SEK. Additionally, our corporate flow model indicates EUR selling at the end of the month. Consequently, we are employing a combined strategy, utilizing the signals from the month-end rebalancing model.
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
Technical & Trade Views
SP500 Bullish Above Bearish Below 5200
Daily VWAP bullish
Weekly VWAP bullish
Below 5190 opens 5160
Primary support 5160
Primary objective is 5300
EURUSD Bullish Above Bearish Below 1.09
Daily VWAP bearish
Weekly VWAP bearish
Below 1.08 opens 1.0750
Primary support 1.08
Primary objective is 1.10 (Potential Objective Change Developing)
GBPUSD Bullish Above Bearish Below 1.27
Daily VWAP bearish
Weekly VWAP bearish
Below 1.2570 opens 1.2510
Primary support is 1.2514
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 .6550 opens .6470
Primary support .6477
Primary objective is .6700 (Potential Objective Change Developing)
BTCUSD Bullish Above Bearish below 68300
Daily VWAP bullish
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!