Daily Market Outlook, May 12, 2023

Asian equities experienced mixed performance to close out the week, as a result of tepid earnings Stateside and lingering concerns over US regional banks, with several names hitting circuit breakers during US trading. The subdued performance in the United States, coupled with disappointing initial jobless claims, contributed to an overall negative risk sentiment. The Nikkei 225 outperformed, reaching its highest level since November 2021. The advance was primarily driven by positive earnings results, particularly from prominent domestic blue-chip stocks. The Hang Seng and Shanghai Composite displayed uncertainty, influenced by a range of factors. From a positive perspective, talks between US National Security Adviser Sullivan and China's top diplomat Wang Yi, hinted at a potential call between President Biden and President Xi. However, investors were less impressed by weaker-than-anticipated Chinese loans and financing data. The scheduled meeting between President Biden and congressional leaders has been delayed until next week, House Leader McCarthy was keen to state that the delay doesn't mean that debt talks are in peril.

This morning investors will shift their attention to a series of economic releases from Europe, after British gross domestic product (GDP) data once again managed to sidestep technical recession by printing meagre economic progress with a 0.1% quarterly gain, however, the year over year number came in just shy of the expected 0.4% at 0.3%. The pound experienced a significant decline on Thursday following the Bank of England's decision to raise interest rates and maintain the possibility of further monetary tightening, investors will eye comments later from BoE’s Pill as to additional colour regarding the future glide path for UK rates especially inlight of the BoE’s acceptance around forecasting missteps. Additionally, inflation reports from France and Spain will be on the slate this morning, shedding light on the effects of European tightening measures on regional prices. These reports will offer additional insight regarding the impact of monetary policies in local regions.

Stateside a somewhat quieter end to what has been a fairly data intensive week, with US export/import prices and first look at University of Michigan sentiment. Treasury Secretary will be on the wires again this morning as she makes remarks ahead of the G7 finance ministers meeting, expect further doomsday rhetoric around any notion of the US failing to raise the US debt ceiling and consequently defaulting on US debt, however, the background mood music appears to be showing improving open lines of communication between congressional parties.

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.0835 (280M), 1.0920-25 (439M), 1.0950 (300M), 1.0975 (410M)
1.1020-30 (1.2BLN), 1.1050 (696M)
USD/CHF: 0.8850-60 (310M), 0.8945-50 (267M)
GBP/USD: 1.2400 (285M), 1.2600 (292M)
EUR/GBP: 0.8725 (300M), 0.8740 (200M), 0.8845-50 (267M)
AUD/USD: 0.6700 (290M), 0.6740 (444M)
USD/CAD: 1.3465 (374M), 1.3500-05 (1.1BLN)
USD/JPY: 134.00 (341M), 134.20 (515M), 134.50 (562M), 135.00 (1.3BLN)

CFTC Data As Of 02/05/2023

USD spec net short cut in Apr 26-May 2 period, $IDX +0.11%
EUR$ +0.36% in period, specs +4,089 contract now +173,489 ahead of ECB hike
$JPY +1.98%, specs +420 contract, now -68,324; Fed rate path uncertain
GBP$ +0.43%, specs -4,774 contracts now +1,065, sellers into strength
AUD$ +0.54% spec short grows by 5,548; $CAD 0.04% spec short grows to 50,096
AUD, CAD under pressure amid global growth concerns, oil hit hard in period
BTC +2.56% in period flips to positive as specs buy 461 contracts on dip early in period (Source RTRS)