Daily Market Outlook - Friday, April 26

By Patrick Munnelly of Tickmill

Friday, April 26, 2024 4:13 AM EST

macbook pro on black table

Image Source: Unsplash

Asian equities saw gains today following strong US tech earnings, rebounding from yesterday's sell-off in both US equities and bonds triggered by Q1 GDP data showing slower growth and stronger inflation than anticipated. Overnight, the Bank of Japan kept short-term interest rates unchanged, as expected, maintaining them in the 0%-0.1% range after shifting them out of negative territory last month.

UK GfK consumer confidence for April was released earlier, with the headline index rising to -19 from -21, slightly surpassing forecasts. This uptrend over the past year suggests modest improvements in consumer fundamentals, supported by peaking interest rates and real wage growth. Eurozone money supply and credit growth data, expected to confirm subdued credit dynamics due to past monetary policy tightening, will be released alongside the ECB's consumer expectations survey, offering insights into household inflation expectations.

Stateside, the focal point of the day will be the US PCE inflation figures for March, following yesterday's Q1 GDP report, which revealed weaker-than-expected growth but stronger core PCE inflation, indicating potential upside risks to March's inflation data. This may also entail upward revisions to January and February figures. Consequently, look for the March core PCE deflator at 0.4%m/m, higher than the consensus of 0.3%m/m. Despite disappointing GDP growth, this inflationary pressure suggests the Fed may hesitate to implement interest rate cuts.

Overnight Newswire Updates of Note

Bank Of Japan Holds Rates Steady, Expects Inflation To Stay Around 2%
Tokyo Inflation Slows Sharply On Education Subsidy Impact
UK Consumers Get Spring In Step As Confidence Mounts
Trump Allies Draw Up Plans To Blunt Fed’s Independence
ECB Will Need More Rate Cuts If Fed Holds Back, Says Policymaker
China Warns Blinken ‘Negative Factors’ Building In US Relations
Yen Drops To Fresh 34-Year Low As BoJ Keeps Key Rate Unchanged
Oil Prices On Track To Snap Two-Week Losing Streak
Microsoft Sales And Profit Beat Expectations On Robust AI Demand
Alphabet To Pay Its First Dividend After Strong Quarterly Revenue
Intel Slides After Tepid Forecast Shows Comeback Challenges
There is increased demand for USD/CNH FX option strikes, with buyers showing interest in topside strikes around 7.5000 at the start of the week. Implied volatility for 1-month expiry was paid at 3.0 on a good size. There was also good demand for 1-month expiry 7.2000 strikes on Friday, with trading between 3.425 and 3.55 implied vol on over $500 million. Currently, 1-month expiry implied volatility is trading around 3.3. Additionally, 1-month risk reversals rallied to neutral to 0.7 USD calls/CNH puts in mid-April but have since settled around 0.35 USD calls/CNH puts, indicating that the market is still wary of further USD gains/CNH losses.

(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: 1.0675-85 (1.9BLN), 1.0700 (1BLN), 1.0725-30 (1.4BLN)
1.0750 (1.7BLN), 1.0785 (1.1BLN), 1.0800 (548M)
USD/CHF: 0.9100-10 (765M), 0.9200 (276M). EUR/CHF: 0.9775 (357M)
GBP/USD: 1.2430 (1.1BLN), 1.2490-1.2505 (1.1BLN)
AUD/USD: 0.6500 (469M), 0.6515-25 (390M), 0.6540-50 (556M), 0.6570 (377M)
NZD/USD: 0.5905 (329M), 0.5925 (229M), 0.5940 (385M)
USD/CAD: 1.3560-65 (600M), 1.3650 (259M), 1.3770-85 (1.1BLN)
USD/JPY: 155.00 (1.5BLN), 156.00 (376M), 156.25 (320M), 156.50 (530M)
The overnight option expiry has been extended to 10 am New York time on Friday, April 26, and this includes the Bank of Japan (BoJ). There has been a significant increase in the implied volatility of JPY-related FX options. Implied volatility is used to assess the risk of FX realized volatility when determining the premium. The overnight USD/JPY implied volatility is currently at 10.0 to 25.0, the highest since the December BoJ meeting. The premium/break-even for a vanilla straddle is now at 162 compared to 65 JPY pips in either direction. The market is showing a high level of nervousness about potential intervention and the possibility of further weakening of the JPY. Additionally, the Tokyo CPI data is also a factor, along with the U.S. CPI data later on Friday.

CFTC Data As Of 19/04/24

Japanese yen net short position is -165,619 contracts
Swiss franc posts net short position of -36,212 contracts
British pound net long position is 8,619 contracts
Euro net long position is 12,224 contracts
Bitcoin net short position is -363 contracts
Equity fund managers cut S&P 500 CME net long position by 89,326 contracts to 850,042
Equity fund speculators trim S&P 500 CME net short position by 139,497 contracts to 193,791