Munnelly’s Market Commentary… 

Asian equity markets traded with mixed results as indecision prevailed heading towards the end of the month, quarter and half year. The performance followed a volatile session in the US, where global markets digested the recent central bank rhetoric from the Sintra Forum. Most central bankers, including Fed Chair Powell, signalled the likelihood of further rate increases. The Nikkei 225 extended its gains, briefly surpassing the 33.5K handle, supported by the recent strength of USDJPY and better-than-expected Japanese Retail Sales. However, the Hang Seng and Shanghai Composite remained subdued due to ongoing trade frictions and the possibility of additional US tech export restrictions on China. The losses in the mainland markets were cushioned by the continued liquidity efforts of the People's Bank of China.

In the UK, market participants will be parsing upcoming data releases including the Bank of England's money and credit data, the second estimate of Q1 GDP, and the Lloyds Business Barometer. Mortgage approvals, which have shown stabilisation in recent months, are expected to improve in the latest figures for May. Q1 GDP growth is anticipated to remain unchanged at 0.1% quarter-on-quarter. The Lloyds Business Barometer report for June will provide insights into hiring intentions amid rising services inflation. Monetary Policy Committee member Tenreyro is scheduled to deliver a speech before leaving the Bank.

In the Eurozone, investor focus remains on national inflation releases ahead of tomorrow's Eurozone June flash CPI estimate. Italy reported a decline in annual inflation to 6.7%, while Spain's EU-harmonised inflation rate is expected to decrease to 1.5%. Germany's EU-harmonised inflation measure is forecasted to rise to 6.8%, driven by base effects. Overall, Eurozone inflation is projected to fall to 5.5% in June, but core CPI is expected to tick back up to 5.5%, adding pressure for the ECB to raise rates again next month. Survey evidence indicates a further fall in economic sentiment, reflecting a more pessimistic outlook among firms.

Stateside, a marginal upward revision to Q1 GDP growth to 1.4% (annualised) is possible, indicating continued strength in economic activity. However, attention will be on the weekly initial jobless claims data for further indications of the labour market's condition and any signs of softening.

Citi Quants Month End Rebalancing Expectations

Citi has published its preliminary estimate for month-end FX rebalancing, indicating a preference for selling USD. According to their model, both hedge and asset FX rebalancing requirements align in this direction. The estimate suggests that negative flows from US equities will have a significant impact on equity rebalancing. It is worth noting that month-end flows typically influence FX markets in the days leading up to the end of the month.

CFTC Data As Of 23-06-23

  • (USD net spec short grew in Jun 14-20 period; $IDX -0.76%

  • EUR$ +1.15% in period, specs -7,173 contracts into strength, now +144,649

  • $JPY +1.31% in period, JPY soft amid rate divergence, specs -3,680 contracts

  • GBP$ +1.21%, specs get long ahead of CPI/BoE, +39,873 contracts now +46,608

  • Specs guessed right higher CPI, +50bp BoE but GBP$ -150 pips from weeks high

  • AUD$ +0.3% in period, specs +12,129 contracts on hawkish RBA, now -33.5k

  • BTC +8.96%, specs 346 contracts into strength, halved long to +397 contractsSource: Reuters)

FX Options Expiries For 10am New York Cut

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

  • EUR/USD: 1.0800 (2.9BLN), 1.0825 (628M), 1.840-50 (824M)

  • 1.0895-1.0900 (1.8BLN), 1.0925-35 (637M), 1.0950-60 (919M), 1.1000 (1.5BLN)

  • USD/CHF: 0.8990-0.9000 (950M), 0.9010-20 (898M)

  • GBP/USD: 1.2665 (542M), 1.2700 (1BLN)

  • EUR/GBP: 0.8600 (919M) . AUD/USD: 0.6800 (789M)

  • AUD/NZD: 1.0850 (755M), 1.0955 (715M)

  • USD/JPY: 144.00 (1.3BLN), 1.4430-35 (627M), 144.50 (1.5BLN)

  • EUR/JPY: 156.00 (310M).

  • USD/CAD: 1.3150 (1BLN), 1.3200 (644M), 1.3225 (379M), 1.3250 (439M)

Overnight News of Note

  • Asia Markets Mixed Amid Fed Hints Of More Rate Hikes Ahead

  • More Tightening To Come, Top Central Bank Officials Warn

  • Banks Shrug Off Turmoil To Ace Fed's Annual Health Checks

  • Biden Tries To Flip Sceptical US Public On His Economic Plan

  • Yellen Says Hope Meet New Leaders On Possible China Trip

  • Banks Take Losses On Commercial Real Estate, Yellen Says

  • China Carries Yuan Support In Stronger-Than-Expected Fix

  • Chinese Balloon Used American Tech To Spy On Americans

  • BoJ May Tweak Yield Curve Control In Q3 2023, HSBC Says

  • Japan’s Retail Sales Rebound, Adding To Signs Of Recovery

  • Australian Retail Sales Exceed Forecasts, Spending Resilient

  • ECB's Centeno: Reaching Time When Policy May Pause Soon

  • Chipmaker Micron Beats On Booming AI Demand, Easing Glut

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4340

  • Below 4330 opens 4300

  • Primary support is 4300

  • Primary objective is 4580

  • 20 Day VWAP bullish, 5 Day VWAP bullish

EURUSD Intraday Bullish Above Bearsih Below 1.0880

  • Below 1.0880 opens 1.0830

  • Primary support is 1.0666

  • Primary objective is 1.1050

  • 20 Day VWAP bullish, 5 Day VWAP bearish

GBPUSD Bias: Intraday Bullish Above Bearish Below 1.2650

  • Below 1.26 opens 1.2550

  • Primary support  is 1.2680

  • Primary objective 1.2880

  • 20 Day VWAP bullish, 5 Day VWAP bearish

USDJPY Bullish Above Bearish Below 143.50 Target Hit, New Pattern Emerging

  • Below 143 opens 142.30

  • Primary support  is 141

  • Primary objective is 145.50

  • 20 Day VWAP bullish, 5 Day VWAP bullish

AUDUSD Bias:Intraday Bullish Above Bearish Below .6660

  • Below .6600 opens .6550

  • Primary support  is .6648

  • Primary objective is .6917

  • 20 Day VWAP bearish, 5 Day VWAP bearish

BTCUSD Intraday Bullish Above Bearish below 29500

  • Below 28000 opens 26900

  • Primary resistance is 27400

  • Primary objective is 32750

  • 20 Day VWAP bullish, 5 Day VWAP bullish