Daily Market Outlook, May 25 , 2023

Asian equities were mainly lower overnight as caution prevailed in the region following Wall Street's losses. The market sentiment was influenced by concerns over the US debt ceiling and the release of the Federal Open Market Committee (FOMC) Minutes, which revealed a division among officials regarding support for further interest rate hikes,credit rating agency Fitch said that it has put the US’s credit rating on watch as concerns mount regarding the US debt ceiling. However, US index futures received a boost in after-hours trading as NVIDIA shares surged by approximately 25% following their earnings announcement, bringing the company closer to the trillion-dollar market cap club. The Nikkei 225 index managed to stay afloat, posting a modest 0.3% gain, but lacked significant positive drivers or notable data release catalysts. The Hang Seng and Shanghai Composite also recorded modest declines; both markets were affected by ongoing tensions between the United States and China.

Data released this morning has just confirmed that the largest economy in the Eurozone has entered a technical recession, German GDP was revised to -0.2% for the first quarter confirming a second quarter of negative growth for the region. The remainder of the European data slate is scant, in the UK one notable release in May is the Confederation of British Industry's (CBI) retail survey, which provides an unofficial measure of retail activity. This survey is released a day before the official reading for April. The consumer outlook remains uncertain, but there have been preliminary indications of stabilisation in early 2023. In March, retail sales experienced a decline, although the preceding two months had seen gains. The CBI measure of retail activity has shown improvement after a weak performance in January. Additionally, GFK's consumer confidence measure has been gradually increasing for four consecutive months. Jonathan Haskel (Hawkish), an external member of the Bank of England's (BoE) Monetary Policy Committee, is slated to deliver a speech on international inflation developments at an event in Washington. His speech is expected to focus on the global landscape of inflation, examining trends and developments in different countries and regions.

Stateside Q1 GDP is a second estimate, and it is not anticipated to have significant revisions from the initial release. The first release indicated that the economy was still growing, albeit at a slower pace compared to the fourth quarter of 2022. Weekly initial jobless claims will be on watch, while there was a decline in jobless claims last week, it is worth noting that these claims have shown an overall uptick in recent releases. Investors will parse comments from Fed's Barkin, who is a non-voting member, speaking in Virginia. Fed's Collins, another non-voting member of the Federal Reserve with a neutral stance, is scheduled to speak at the Rhode Island Community College.

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0765 (1BLN), 1.0790-1.0800 (440M), 1.0830-40 (737M)
USD/CHF: 0.8950 (680M), 0.9030 (465M) , 0.9105 (350M), 0.9125 (252M)
GBP/USD: 1.2300 (380M), 1.2400 (270M), 1.2420-25 (202M)
EUR/GBP: 0.8700 (219M) . AUD/NZD: 1.0500 (400M) , 1.0750 (214M)
USD/CAD: 1.3600 (814M)
USD/JPY: 138.10 (838M) , 138.50-55 (660M), 139.00 (258M), 139.50 (850M)

CFTC Data As Of 12/05/2023

IMM net USD short grew in May 10-16 period, specs sell into 0.8% $IDX rise
EUR$ fell 0.93% in period, specs bottom-fish +7,667 contracts now +187,089
EUR position remains elephant in room, for now holds w/in 1.07-1.11 range
A break out of EUR/USD's 1.07-1.11 range may see protracted move
$JPY rose 0.88% in period , spec -3,776 contracts short grows to -64,791
GBP$ -1.05% in period, specs buy weakness +8,065 contract now +12,593
AUD$ -1.66% in period. Specs -4,401 contracts now short 53,594
BTC -2.88% in period, specs buy dip add 588 contracts now long 1,011(Source RTRS)