Daily Market Outlook, May 15, 2023

Asian equities are starting the week on the front foot with most major indices in the green, mirroring the positive sentiment seen in US and European futures, as the mood music around negotiations aimed at preventing a US debt default continued over the weekend. The Turkish elections appeared poised for a second-round run-off between President Erdogan and his primary contender, Kilicdaroglu, as neither candidate seemed poised to surpass the 50% threshold required for an outright victory.

No significant data releases are expected in the UK, investors will be paying attention to the remarks of Huw Pill, the Chief Economist of the Bank of England. Pill is scheduled to participate in an online event to provide insights into the specifics of the May Monetary Policy Report. Following last week's policy announcement, where the Monetary Policy Committee (MPC) raised interest rates by an additional 25 basis points to 4.50%, Pill commented that although inflation was showing signs of decline, the continued presence of elevated inflationary pressures could potentially lead to further tightening measures.

After a series of central bank meetings in recent weeks, the upcoming week is anticipated to be relatively quiet in terms of major data events. However, several data releases are expected to offer valuable insights into future monetary policy decisions. In the Eurozone, it is projected that industrial production experienced a significant decline in March, following two consecutive months of growth earlier in the quarter. The data already released for countries such as France, Germany, Italy, and Ireland indicate a similar trend, with Ireland witnessing a substantial month-on-month decrease of 26.4%. Despite the expected contraction, it would still result in an overall increase in Eurozone industrial output for the first quarter.

Stateside, investors will focus on the Empire State manufacturing survey for May; it is expected to indicate a return to contractionary territory based on forecasts. This outcome would imply that the positive reading seen in April was a temporary anomaly. Several representatives from the Federal Reserve, namely Bostic, Goolsbee, Kashkari, and Cook, are scheduled to deliver speeches. Market participants will closely observe these speeches for any indications that they support the possibility of the Fed pausing interest rate hikes at the coming June meeting

FX Options Expiries For 10am New York Cut

(In bold represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0880-90 (500M) 1.0900-05 (585M), 1.1000 (830M)
GBP/USD: 1.2390-1.2400 (631M), 1.2440 (373M), 1.2495-1.2510 (436M)
1.2600 (308M). EUR/GBP: 0.8635-45 (300M), 0.8735 (300M), 0.8830 (300M)
AUD/USD: 0.6700 (243M), 0.6725 (360M).
USD/CAD: 1.3500-05 (922M), 1.3250 (377M), 1.3550 (454M)
AUD/JPY: 90.00 (345M).
EUR/JPY: 146.20 (404M), 150.50 (486M)

CFTC Data As Of 12/05/2023

USD net spec short position grew in May 3-9 period; $IDX -0.24$
EUR$ -0.38% in period, specs +5,933 contracts now long 179,422
Net EUR long position highest since Oct 2020, was +212k in Aug 2020
$JPY -0.96% in period, specs +7,309 contracts yen short pared to -61,015
GBP$ +1.2%, trade to new 2023 high; specs buy 3,463 contracts now long 4,528
$CAD -1.77%, specs cut CAD short +7,833 contracts; AUD$ +1.52%, specs -4,183
BTC -3.62% in period, specs buy dip add 255 contracts now long 423 (Source RTRS)