Daily Market Outlook - Monday, April 15

By Patrick Munnelly of Tickmill

Monday, April 15, 2024 6:15 AM EST

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On Monday, Asian investors initially focused on reducing risk and playing it safe before buyers emerged as relief around Middle East tensions increased risk appetite. With the yen reaching a 34-year low against the dollar, traders are wary of intervention from the Bank of Japan. Japanese authorities have not intervened despite warnings, possibly because the yen's decline is justified by U.S. growth and inflation rates outpacing Japan's. The strong dollar and rising U.S. bond yields may pose problems for Asia by tightening financial conditions and increasing the cost of servicing dollar-denominated debt. Geopolitical tensions may not provide much comfort as investors seek to reduce risk in their portfolios.

Last week's release of US CPI inflation for March brought about an unexpected twist, triggering a significant reassessment in global interest rate projections. Presently, markets are factoring in just one Fed rate cut for the year. This outcome underscores the resilience of US CPI throughout Q1, heightening the possibility that US policymakers might exercise greater patience before implementing interest rate reductions. Consequently, the likelihood of a mid-year initial Fed rate cut has diminished. Investors await cues from Fed officials regarding the prospect of a June rate cut, with speculation lingering until after the May 1 update. The market has shifted its fully priced first cut expectation to September.

Today's market attention rests on the US retail sales report, expected to reveal a 0.6% increase in headline activity for March, indicating only a marginal slowdown in Q1 consumption growth. Next week's release of the advance estimate of Q1 GDP growth is projected to exhibit moderation but still maintain a pace above trend, contributing to the Fed's cautious stance on policy easing. Overnight, Fed member Daly is set to affirm that there's no immediate need to adjust interest rates.

In the UK, the upcoming week is brimming with significant data releases, including labor market updates, CPI inflation, and retail sales figures. These releases are crucial for gauging inflationary trends, which could influence the Bank of England's decision to potentially implement rate cuts starting in the summer. Commentary from MPC member Sarah Breeden might offer insights into the timing of the first Bank Rate cut. Early tomorrow, the UK labor market report is anticipated to demonstrate further signs of softening, aligning with survey data and indicating a blend of reduced labor demand and enhanced supply. The central projection suggests a consecutive increase in the unemployment rate, reaching 4.0% in the three months to February. Additionally, a continued softening in annual wage growth across headline and underlying measures, reaching 5.5% and 5.8%, respectively.

Elsewhere, Eurozone industrial production data for February is on the agenda, alongside a speech by ECB Chief Economist Lane. Following last week's policy meeting, the ECB maintains its stance signaling a probable cut in June.

Overnight Newswire Updates of Note

Israel Vows To 'Exact A Price' After Drone And Missile Attack By Iran
White House: US Will Not Join Any Retaliatory Action Against Iran
US House Speaker: Will Try To Pass Israel Aid This Week
Yellen Says Nothing Off Table In Response To China Overcapacity
ECB Set To Cut Interest Rates In June, Villeroy De Galhau Says
China Drains Cash Via MLF For Second Month Amid Yuan Concern
Japan's Machinery Orders Rise Sharply, May Ease Concerns On Demand
New Zealand PSI Release Shows Service Sector Dropping Into Contraction
Oil Shrugs Off Iranian Assault On Israel As Brent Turns Lower
Metals Spike On LME After Russian Metal Hit By US, UK Sanctions
Apple’s iPhone Shipments Plunge 10% As Android Rivals Rise
Tesla Is Rumoured To Be Preparing A Massive Round Of Layoffs

(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: 1.0575 (761M), 1.0640-50 (407M), 1.0700 (420M)
1.0740-50 (2.5BLN), 1.0770 (610M)
AUD/USD: 0.6500 (711M), 0.6600 (1.3BLN)
USD/CAD: 1.3665-75 (300M), 1.3750-55 (631M)
USD/JPY: 153.10 (375M), 155.00 (400M)
EUR/JPY: 161.00 (225M). AUD/JPY: 99.00 (225M)

CFTC Data As Of 29/03/24

Equity fund managers raise S&P 500 CME net long position by 9,236 contracts to 939,368
Equity fund speculators trim S&P 500 CME net short position by 32,395 contracts to 333,288
Japanese yen net short position is -162,151 contracts
Euro net long position is 32,723 contracts
British pound net long position is 28,252 contracts
Swiss franc posts net short position of -31,764 contracts
Bitcoin net short position is -153 contracts
Gold NC Net Positions climbed from previous $199.3K to $207.3K