Daily Market Outlook, July 17, 2024

Munnelly’s Macro Minute…

“Gold Printing Record Highs As UK Inflation Remains Sticky ”

Asian stocks rose, joining a global surge, as the anticipation of the Fed starting to reduce interest rates led to a rush into riskier sectors of the market.The MSCI Asia Pacific Index, which measures regional benchmarks, rebounded after a three-day decline following the record highs in US equities, propelling global stocks to a new peak. However, the index's earlier gains were tempered by a drop in Japanese stocks after the US cautioned its allies about stricter trade regulations in the China crackdown. Meanwhile, traders in Hong Kong and mainland China awaited further details from the Third Plenum. Risk appetite seems to have returned in Asia as concerns about geopolitical and trade threats sparked by the increasing prospects of a Donald Trump administration have eased. The optimism surrounding the Fed's potential rate cut, coupled with signs of a retail recovery in the US, has bolstered sentiment.

During the grand opening of the new parliament, King Charles of Britain will announce the agenda of Keir Starmer's Labour government, focused on rebuilding the economy amidst political turmoil. In June, there were continued concerns about the stickiness of UK inflation. Although headline inflation had returned to target the month before, the latest UK CPI report revealed a lack of improvement in the underlying measures. Unfortunately, none of the measures showed any signs of progress. The CPI remained unchanged at 2.0% year-over-year (compared to a median forecast of 1.9%), while core CPI stayed at 3.5% year-over-year and services inflation remained at 5.7% year-over-year, both slightly higher than the survey estimates.

Gold reached record highs in Asia due to increasing expectations of interest rate cuts, while Taiwan stocks were affected by Donald Trump's indecisiveness regarding the United States' dedication to the island in his comments to Bloomberg Businessweek. "Taiwan has taken away our chip business," Trump stated. "They are extremely wealthy... I don't see any difference between them and an insurance policy. Why are we doing this?" Shares in Taiwanese chipmaker TSMC dropped by 1.4%.

Overnight Newswire Updates of Note

IMF Warns Sticky Inflation Could Keep Interest Rates ‘Higher For Even Longer’
Starmer To Press Ahead With Legislation Aimed At Boosting UK Growth
Starmer To Press Ahead With Legislation Aimed At Boosting UK Growth
The IMF Upgrades Forecast For UK Economic Growth - Boost For Labour Government
UK and EU consider holding first summit to improve post-Brexit relationship
RBNZ’s Less Hawkish Stance Drags Down Kiwi, Fuels Rate-Cut Bets
Inflation outcome shores up view the RBNZ will cut by November
UK Can Adjust Public Debt Rule To Ease Impact Of BoE Losses, Say Investors
Japanese Yen Continues To Depreciate Despite Intervention Threat
Russia Plans To Make OPEC+ Compensation Oil Cuts In Warm Seasons

(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: 1.0850 (802M), 1.0880-85 (734M), 1.0890-1.0900 (1.2BLN)
1.0920-25 (901M)
USD/CHF: 0.8800 (450M), 0.8850 (500M), 0.9050-60 (543M)
GBP/USD: 1.2900 (310M)
EUR/GBP: 0.8350 (360M), 0.8400-15 (312M), 0.8450 (310M)
AUD/USD: 0.6700 (408M), 0.6750-60 (414M), 0.6795-0.6800 (410M)
AUD/NZD: 1.1050 (304M), 1.1075 (250M), 1.1150 (271M)
USD/JPY: 157.05 (751M), 158.40 (300M), 158.50 (1.3BLN), 158.60 (351M)

CFTC Data As Of 9/7/24

Japanese yen net short position is -182,033 contracts
Euro net long position is 3,623 contracts
British pound net long position is 84,690 contracts
Swiss franc posts net short position of -46,088 contracts
Bitcoin net short position is -118 contracts
Equity fund speculators increase S&P 500 CME net short position by 47,949 contracts to 341,624
Equity fund managers raise S&P 500 CME net long position by 24,304 contracts to 977,432