Daily Market Outlook - Wednesday, June 26

By Patrick Munnelly of Tickmill

Wednesday, June 26, 2024 4:33 AM EDT

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Choppy Asian stock markets as they awaited new catalysts, with the Australian dollar appreciating in response to faster-than-expected inflation statistics. Mainland China and Australia's equity indices fell, while Japan, South Korea, and Taiwan's indices increased. US stock futures remained unchanged in Asian trade following a rally in Nvidia shares on Tuesday. The inflation data indicated persistent high price pressures, strengthening the case for central bank interest rate hikes, leading to an increase in Australia's dollar and bond yields. The JPY proximity to the psychologically significant threshold of 160 per dollar may raise concerns about intervention if breached.

Investors are showing caution in making significant decisions as they await the release of the U.S. personal consumption expenditures price index on Friday, which is a key measure of inflation for the Federal Reserve. Economists anticipate a slowdown in annual growth to 2.6% in May, the slowest in over three years. In the meantime, market participants are paying attention to statements from Federal Reserve officials, who are emphasizing the need for patience and indicating that there is no rush to lower interest rates, dampening expectations for rate cuts. The market is currently pricing in approximately two rate cuts for this year, with a 67% likelihood of a cut in September according to the CME FedWatch tool. Futures suggest that European stock markets are poised for a higher opening, potentially boosted by a rebound in tech stocks following a strong performance by Nvidia, which gained over 6% after a three-session decline that wiped out about $430 billion from its market value.

As the economic calendar is relatively empty, market movements may be limited by caution related to the end of the quarter. Attention will also be on the euro as France prepares for a significant vote this weekend.

Overnight Newswire Updates of Note

Fed's Cook: 'At Some Point' It Will Be Time To Cut Interest Rates
Bond Traders Boldly Bet On 300 Basis Points Of Fed Cuts By March
ECB’s Rehn Sees Bets For Two More Cuts In 2024 As ‘Reasonable’
Aussie CPI Rises To 4% Stoking Concern Rates Could Increase Again
Deutsche Bank Now Sees RBA Raising Rates 25bps To 4.6% In August
Australia ‘Alert’ To Upside Risks To Inflation, RBA’s Kent Says
New Zealand Treasury Eyes More Spending Cuts, Revenue Options
‘Crazy’ For Japan To Intervene On Yen Before Friday, Traders Say
Oil Steadies As Industry Report Points To Rising US Stockpiles
FedEx Stocks Jumps After Company Snaps Streak Of Revenue Declines
Visa, Mastercard $30 Billion Swipe Fee Settlement Rejected By US Judge
Volkswagen To Invest Up To $5 Billion Into EV Maker Rivian

(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: 1.0625-35 (2.3BLN), 1.0660 (330M), 1.0675-80 (940M)
1.0700 (2.4BLN), 1.0725-30 (1.4BLN), 1.0745-50 (2.4BLN), 1.0765 (302M)
USD/CHF: 0.8900 (901M), 0.8950 (591M)
EUR/CHF: 0.9575 (250M), 0.9600 (500M)
GBP/USD: 1.2635 (446M), 1.2650-55 (607M), 1.2700-05 (832M), 1.2720 (515M)
AUD/USD: 0.6620-30 (878M), 0.6660-65 (1.5BLN), 0.6675-80 (575M)
0.6700 (520M)
NZD/USD: 0.6120-25 (380M). AUD/NZD: 1.0850 (1.1BLN)
USD/CAD: 1.3650-60 (618M)
USD/JPY: 158.90-159.00 (2.4BLN), 159.10-20 (380M), 159.50 (704M)
160.00 (627M), 160.50 (702M)
Barclays' month end model suggests that there may be dollar selling at the end of the month, despite the dollar index being up almost 1% in June and close to an eight-week high. The model indicates potential dollar selling against most major currencies by the end of the month, based on foreign versus U.S. equity and bond performance. This is driven by a continued rally in U.S. equity markets, while ex-U.S. assets are either stagnating or experiencing losses amid heightened uncertainty. The model predicts higher rebalancing demand in Europe and Japan, as these regions have experienced most of the outflows in equities.

CFTC Data As Of 21/06/24

Bitcoin net short position is -723 contracts
Swiss Franc posts net short position of -37,390 contracts
British Pound net long position is 47,621 contracts
Euro net long position is 7,951 contracts
Japanese Yen net short position is -147,753 contracts
Equity fund speculators increase S&P 500 CME net short position by 112 contracts to 353,049
Equity fund managers cut S&P 500 CME net long position by 7,915 contracts to 960,056