Daily Market Outlook, June 23, 2023

Munnelly’s Market Commentary…

Asian equity markets struggled to maintain their early positive momentum and stumbled, influenced by the mixed performance seen in the US. While the S&P 500 and Nasdaq managed to end their losing streaks, most sectors finished the day in negative territory following a busy day of central bank activity, which included several rate hikes.

The Nikkei 225 surrendered its initial gains and more as market participants digested mixed inflation data from Japan. Although the headline and core consumer price index (CPI) showed a slowdown, the latter and core-core readings were still stronger than expected. Additionally, Japan's manufacturing purchasing managers' index (PMI) slipped below the benchmark level of 50. The Hang Seng faced pressure upon its return from the Dragon Boat Festival. The index was dragged lower by substantial losses in the healthcare, technology, and property sectors. Rising global yields and the closure of Stock Connect trade due to the mainland holiday added to the headwinds affecting sentiment.

Investors will closely monitor this morning's flash PMI reports, which provide an early indication of economic activity and price trends for June, particularly in the UK and Eurozone. Recent surveys have depicted a two-speed economy, with manufacturing output hindered by weak demand despite an easing of supply bottlenecks. Conversely, services activity has benefited from stronger consumption driven by improved labor markets and a shift in spending away from goods.

Forecasts suggest a rise in the UK manufacturing PMI to 48.1 from 47.1, indicating growth below the 50 no-growth threshold. Meanwhile, services PMI is expected to remain in expansion territory, increasing to 55.6 from 55.2. For the Eurozone, expect a slight decline in manufacturing and services PMIs to 44.3 and 54.0, respectively. These outcomes align with stronger GDP growth projections for the UK and Eurozone in the second quarter.

The release of the S&P Global US flash PMIs is also scheduled for today, although they tend to garner less attention compared to their European counterparts. Similarly to Europe, expect the manufacturing index to remain below the 50 level at 48.5, while the services PMI is projected to be 54.5, slightly lower than May's 54.9.

CFTC Data As Of 16-06-23

MM net spec USD short dipped in Jun 7-13 period, $IDX -0.75%
EUR$ +0.94% in period, specs -6,599 contracts now +151,822
$JPY +0.48% in period, specs +841 contracts now -103,976
GBP$ +1.54% in period, specs -5,749 contracts now +6,735
AUD$ +1.45%, specs -5,277 contracts now -61,745; $CAD -0.63% specs +1,661
BTC -4.1% in period specs -26 contracts now long 743 contracts
Positioning data pre-Fed, ECB, BoJ meetings, no surprises by c.banks
Post-meetings Fed pause weighed on USD vs EUR, GBP; JPY tumbles on ultra-soft BoJ guidance(Source: Reuters)

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.0855 (585M), 1.0900 (667M), 1.0940-50 (529M), 1.0960 (513M)
1.1000 (864M). USD/CHF: 0.8975-80 (532M), 0.9055 (239M)
EUR/GBP: 0.8600-10 (829M).
GBP/USD: 1.2500 (787M), 1.2700 (241M), 1.2750 (222M)
AUD/USD: 0.6650 (275M), 0.6700 (434M), 0.6740 (500M), 0.6750-60 (507M)
AUD/NZD: 1.1050 (1BLN). USD/CAD: 1.3200 (406M), 1.3250 (758M)
USD/JPY: 141.90 (800M), 1.4250 (347M), 145.00 (650M)

Overnight News of Note

Japan’s Inflation Outpaces Forecast Amid Focus On BoJ Price View
China Says US Should Act To Undo Negative Impact Of Biden's Xi RemarkIndia,
US Agree To End Six WTO Disputes, Lift Some Tariffs
Fed’s Powell Says US May Need One Or Two More Rate Hikes In 2023
Fed's Barkin: 'Unconvinced' Inflation In Decline But Will Not Prejudge July Meeting
Fed Lending To Banks Shrinks Modestly In Latest Week
Yellen Sees Lower US Recession Risk, Says Consumer Slowdown Needed
Dollar Rises As Hawkish Central Banks Dent Risk Sentiment, Sterling Slips
Crypto Traders Are Betting On Asia As A Haven After US Crackdown
Oil Steadies After Sliding On Bank Of England Rate Hike
Ford Prepares New Round Of Layoffs For US Salaried Workers
3M Reaches Tentative $10.3 Bln Deal Over US 'Forever Chemicals' Claims
Canada Passes Law Forcing Facebook, Google To Pay Media For Links
Siemens Energy Scraps Profit Outlook As Wind Turbine Troubles Deepen