Daily Market Outlook - Tuesday, March 18

By Patrick Munnelly of Tickmill

Tuesday, March 18, 2025 7:30 AM EDT

Image Source: Pexels

Trading during the Asia session was buoyed by renewed optimism surrounding China, which has unexpectedly benefitted from disruptions in U.S. markets and growth projections under Trump’s administration. This latest upswing was driven by the release of another unexpectedly weak U.S. retail sales report, alongside confirmation from the White House that reciprocal tariffs will take effect on April 2. These developments have put downward pressure on the dollar while boosting gold prices. Adding to the positive sentiment, China introduced childcare subsidies and other consumer-friendly measures, with Monday’s data hinting at a modest rise in retail spending. The Hang Seng index climbed to a three-year high, marking a nearly 23% gain for the year—the largest among major markets. Gains were broad-based, with miners, automakers, technology, and retail stocks leading the charge. Notably, Shenzhen-listed shares of electric vehicle manufacturer BYD soared to an all-time high after the company unveiled a new platform capable of charging electric vehicles as quickly as refuelling a gas-powered car.

Meanwhile, markets are closely monitoring a phone conversation scheduled for today between Donald Trump and Russian President Vladimir Putin, as the U.S. pushes for a ceasefire and peace agreement in Ukraine ahead of several central bank meetings later this week. The dialogue comes during a period of relative market stability, with any progress toward peace likely to drive down European gas prices and strengthen the euro. While Putin’s demands appear familiar, Trump indicated discussions would cover land, power plants, and “dividing up certain assets,” expressing optimism about reaching a potential deal. However, European Union foreign policy chief Kaja Kallas commented on Monday that Russia’s conditions for a ceasefire suggest Moscow is not genuinely committed to achieving peace.

This week’s Fed and BoE meetings are unlikely to see changes in rates. However, Fed balance sheet policy may draw attention, with potential QT slowdown or pause mentioned in the last meeting minutes. If this occurs, it could support US Treasuries, especially as focus shifts to heavy gilt supply ahead of the 2025-26 remit announcement. This scenario highlights differences in Fed and BoE policies: the Fed aims to maintain ample reserves by topping up UST holdings, while the BoE continues gilt sales, relying on repos for reserves. This contrast might pressure gilts, given the steepness of the curve versus USTs. Yet, caveats exist: Fed QT adjustments may favour shorter maturities, limiting longer-term Treasury support, and gilt market reactions may hinge on maturity splits rather than remit size, complicating yield curve predictions. Considering exchange rate strength, FX markets may offer a clearer response to UK fiscal credibility than gilts.

Investors will also eye Nvidia's annual software developer conference, where CEO Jensen Huang will deliver a highly anticipated keynote address on Tuesday. Huang is expected to reaffirm the dominance of Nvidia's nearly $3 trillion chip empire, even as its major clients face mounting pressure to cut artificial intelligence costs. The conference is also set to feature the unveiling of Vera Rubin, a next-generation chip system poised to succeed Nvidia's Blackwell chips.

Overnight Newswire Updates of Note

German Top Court Rejects More Attempts To Stop Debt-Brake Vote
UK Trade Minister Seeks To Fend Off Threat Of US Tariffs
Canada's Carney Heads To Europe For 'Partners' As Trump Targets
Trump Taps Michelle Bowman To Be Fed’s Top Bank Cop
Trump’s Policies Set To Cool Growth And Lift Inflation, Economists Say
US Carries Out New Strikes Houthis In Yemen's Capital
Trump: Iran Will Face Consequences Unless Houthi Attacks Stop
Israel Strikes Gaza Amid Ceasefire Talks Breakdown
China Halts US LNG Imports As Trade War Reroutes Deliveries
China Is Said To Scrutinize Li Ka-Shing's Port Deal For Breaches
BoJ To Hold Rate Steady As Concern Over Global Outlook Mounts
Goldman: Japan’s Wages Need To Rise Further To Meet BoJ Goal

(Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.0870-75 (500M), 1.0900 (1.6BLN), 1.0910-15 (872M), 1.0950 (894M)
1.0960-65 (673M), 1.0950 (765M), 1.0960-65 (674M)
USD/CHF: 0.8800 (1.1BLN), 0.8820 (240M)
EUR/GBP: 0.8400 (300M), 0.8425 (458M)
AUD/USD: 0.6320-30 (1.9BLN), 0.6375 (410M) , 0.6430 (468M)
USD/CAD: 1.4270-80 (918M), 1.4340-45 (858M), 1.4385 (290M), 1.4400 (261M)
USD/JPY: 148.50 (1.6BLN), 149.00 (1.4BLN), 149.75 (475M), 150.00 (1.6BLN)

CFTC Data As Of 14/3/25

Speculators have significantly adjusted their positions across various financial instruments. In CBOT US Treasury Bonds futures, net short positions rose by 16,407 contracts to a total of 34,204. Similarly, CBOT US Ultrabond Treasury futures saw an increase of 19,490 contracts in net short positions, reaching 251,394. The net short position for CBOT US 2-year Treasury futures surged by 50,916 contracts to 1,222,215, while CBOT US 5-year Treasury futures experienced a significant rise of 75,006 contracts, bringing the total to 1,873,367. For CBOT US 10-year Treasury futures, the net short position increased by 25,035 contracts, now standing at 737,075.
On the equity side, speculators reduced their S&P 500 CME net short position by 87,266 contracts, bringing it down to 204,619. Concurrently, equity fund managers trimmed their S&P 500 CME net long position by 59,714 contracts, lowering the total to 841,841.
In the currency markets, the Japanese yen holds a net long position of 133,902 contracts, while the euro has a net long position of 13,090 contracts. The British pound reflects a net long position of 29,193 contracts, whereas the Swiss franc shows a net short position of -36,957. Meanwhile, Bitcoin maintains a net long position of 1,529 contracts..