Asian equities mostly traded in the red, following the negative lead from Wall Street. Investor sentiment was affected by ongoing concerns over the US debt limit impasse, with only nine days remaining until the presumed X-date. Additionally, tensions between the US and China intensified after the US House China Select Committee Chair called for retaliatory measures against China's ban on Micron. 

In Japan, the Nikkei 225 fell by 0.8%, even after reports that the government is considering providing childcare handouts for individuals up to 18 years old. The index remained below the 31K handle following a recent pullback. Despite the first positive reading this year in the monthly Reuters Tankan manufacturing survey, risk appetite remained subdued. 

Earlier this morning, the UK released its inflation figures, showing a decrease in headline Consumer Price Index (CPI) to 8.7% in April from 10.1% in March. However, the drop in the annual rate was smaller than expected.  Further declines in headline CPI are anticipated in the coming months, with Ofgem expected to announce a decrease in the energy price cap for July on Thursday. Despite this, policymakers remain concerned about the risks of second-round effects on domestic prices and wages, as well as the persistence of services inflation. In April, core inflation, which excludes food and energy, rose to 6.8% compared to 6.2% in March.

UK investors will eye CBI industrial trends survey which will provide an update on UK manufacturing sentiment for the middle of the second quarter. In the Eurozone investors focus will be on the German IFO business survey for May. Markets expect a slight decline in the headline IFO index to 93.0, breaking the six-month streak of increases. Despite this, the European Central Bank (ECB) remains committed to reducing inflation and is on track to raise interest rates again next month.

Stateside, the minutes of the Federal Reserve's May meeting will be released. During that meeting, the Fed increased the fed funds target rate by 25 basis points to a range of 5.00-5.25%. The market expects the Fed to pause in June, but positive data surprises and hawkish comments from policymakers could alter expectations. US Treasury yields have risen recently, and there is currently a 20-25% probability assigned to a rate hike in June. Fed Governor Waller is scheduled to speak at a university event later today. While influential members such as Fed Chair Jerome Powell, Vice Chair Lael Brainard, and President John Williams have expressed their support for maintaining the current monetary policy stance in June, Governor Waller's views lean more towards a hawkish position. It will be interesting to hear Governor Waller's remarks and how they may shape the expectations regarding the upcoming Fed policy decision.

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.0750-60 (1.3BLN), 1.0830 (401M)

• GBP/USD: 1.2350 (350M), 1.2375 (641M)

• EUR/GBP: 0.8660 (200M), 0.8700 (403M)

• AUD/USD: 0.6610 (555M), 0.6695-0.6700 (834M) .

• USD/CAD: 1.3400 (463M) , 1.3495 (432M), 1.3525 (332M)

• USD/JPY: 137.95-138.00 (406M), 138.25 (500M)

CFTC Data As Of 12/05/2023

• IMM net USD short grew in May 10-16 period, specs sell into 0.8% $IDX rise

• EUR$ fell 0.93% in period, specs bottom-fish +7,667 contracts now +187,089

• EUR position remains elephant in room, for now holds w/in 1.07-1.11 range

• A break out of EUR/USD's 1.07-1.11 range may see protracted move

• $JPY rose 0.88% in period , spec -3,776 contracts short grows to -64,791

• GBP$ -1.05% in period, specs buy weakness +8,065 contract now +12,593

• AUD$ -1.66% in period. Specs -4,401 contracts now short 53,594

• BTC -2.88% in period, specs buy dip add 588 contracts now long 1,011(Source RTRS)

Overnight News of Note

• New Zealand Raises Rates, Signals No More Tightening Needed

• McCarthy, Graves Signal Impasse In White House Debt Talks

• China’s New Ambassador To US Says Relations Face ‘Serious’ Challenges

• Japan Manufacturers' Mood Turns Positive As Economy Recovers

• ECB Needs Several More Rate Hikes, Bundesbank Chief Nagel Says

• ECB’s Lagarde: ECB Rates To Reach `Sufficiently Restrictive Levels'

• Kiwi Pressured As RBNZ Signal Rates Peak After 25bp Hike

• There Is ‘More Room’ For Dollar Strength, Goldman Sachs Says

• Oil Rises For Third Day As Saudis Tell Short Sellers ‘Watch Out’

• Copper Falls Below $8,000 A Ton For First Time Since November

• Chinese Stocks Close to Erasing 2023 Gain as Headwinds Intensify

• Nvidia Chief Says US Tech Industry Hurt By Curbs On China - FT

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4125 

• Below 4100 opens 4050

• Primary support is 4000

• Primary objective is 4230

• 20 Day VWAP bullish, 5 Day VWAP bearish

EURUSD Bias: Intraday Bullish Above Bearish below 1.0860

• Below 1.0790 opens 1.0740

• Primary support  is 1.07

• Primary objective is 1.1128

• 20 Day VWAP bearish, 5 Day VWAP bearish

GBPUSD Bias: Intraday Bullish Above Bearish below 1.2430

• Below 1.2370  opens 1.2310

• Primary resistance  is 1.2540

• Primary objective 1.23

• 20 Day VWAP bearish, 5 Day VWAP bearish

USDJPY Bias: Intraday Bullish above Bearish Below 137.50

• Below 137.40 opens 136.10

• Primary support  is 133

• Primary objective is 140

• 20 Day VWAP bearish, 5 Day VWAP bullish

AUDUSD Bias: Intraday Bullish Above Bearish below .6650

• Below .6620 opens .6550

• Primary resistance  is .6680

• Primary objective is .6500

• 20 Day VWAP bearish, 5 Day VWAP bearish

BTCUSD Intraday Bias: Bullish Above Bearish below 26500

• Below 26000 opens 25800

• Primary support 26000

• Primary objective is 34600

• 20 Day VWAP bullish, 5 Day VWAP bearish

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