Daily Market Outlook, June 10, 2024

Munnelly’s Macro Minute…

“Markets Cautious On French Political Uncertainty ”

President Macron's announcement to hold a sudden parliamentary election in France has had a negative impact on regional market sentiment, with the euro, European equity futures, and French bond futures all trading lower this morning. This decision comes after the ruling party suffered a significant defeat in the EU Parliament elections on Sunday. The first round of the election is set for June 30th. On the domestic front, the KPMG/REC May Report on Jobs showed a further decrease in permanent placements by UK recruiters, along with reports of a sharp rise in job seekers.

The previous week's surge in world shares following rate cuts in Canada and Europe quickly came to a halt, leaving Asian stocks to struggle on Monday due to holidays in Australia, China, Hong Kong, and Taiwan. While it is highly likely that the Fed will reduce their projections for three rate cuts this year during their rate decision announcement on Wednesday, the extent of the reduction remains uncertain. Futures indicate an approximate 36 basis points of easing priced in for this year, and the likelihood of a pre-election rate cut is uncertain. In addition to the Fed, the Bank of Japan is also meeting this week, with expectations for a reduction in its substantial bond purchases. This may provide some relief for the yen, which was facing difficulties in strengthening beyond 157 per dollar against a strengthening greenback on Monday.

Today's schedule is light, with Italian industrial production and the Eurozone Sentix investor confidence survey on the agenda. Comments from ECB members Holzmann and Nagel will be monitored for clues on the timing of the next ECB rate cut, following President Lagarde’s ambiguous guidance at last week’s press conference.

In the UK, while Bank of England rate-setters will remain quiet ahead of the election, previous comments suggest that a summer rate cut is possible, depending on data. Last week’s Decision Maker Panel (DMP) report supported this, confirming the decline in UK firms’ price and wage expectations. However, official wage growth data remains above levels considered stable by the Bank of England, making a rate cut this month unlikely.

Overnight Newswire Updates of Note

Far-Right Make Significant European Parliament Election Gains
ECB’s Holzmann Says Divergence From Fed Would Fuel Inflation
Macron Calls French Legislative Elections After EU Vote Defeat
Market To Scrutinise BoJ Over Signs Of Quantitative Tightening
Japan’s Opposition Party Calls On Kishida To Hold Snap Elections
Japan’s Sputtering Economy Yet To Show Clear Signs Of Recovery
Chancellor Scholz’s SPD Suffers Record Rout In German EU Vote
Germany Warns Against Trade Barriers As EU Readies EV Tariffs
Italy’s Meloni Wins EU Vote As Far-Right Gains Across The Block
UK PM Sunak Poised To Promise Another National Insurance Cut
UK Job Market On Its Way Back After Downturn, Recruiters Say
Gantz Quits Israel Government After PM Fails To Meet Demands

(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: EUR/USD: 1.0685 (1.2BLN), 1.0750-60 (1.1BLN), 1.0775 (1.1BLN)
1.0800 (1BLN), 1.0850 (834M)
USD/CHF: 0.8900 (529M),0.8920 (250M), 0.8950 (339M), 0.9000 (600M).
EUR/CHF: 0.9650 (400M), 0.9700 (705M)
AUD/USD: 0.6590-0.6600 (1.6BLN), 0.6700 (688M)
NZD/USD: 0.6150 (218M), 0.6200 (324M)
USD/CAD: 1.3625 (720M), 1.3680 (639M), 1.3750 (610M)
USD/JPY: 155.95-156.00 (801M), 156.15 (404M), 157.00-15 (700M)
158.00 (250M)

CFTC Data As Of 07/06/24

Bitcoin net short position is -1,119 contracts
Swiss Franc posts net short position of -45,763 contracts
British pound net long position is 43,210 contracts
Euro net long position is 67,870 contracts
Japanese yen net short position is -132,101 contracts
Equity fund managers cut S&P 500 CME net long position by 23,186 contracts to 954,821
Equity fund speculators increase S&P 500 CME net short position by 2,269 contracts to 332,326
Gold NC Net Positions up to $237.3K from previous $236.6K