Daily Market Outlook, May 16, 2023

Asian equities have had a mixed trading session overnight, with the positive momentum from Wall Street failing to be sustained. US regional banks experienced a short squeeze, driving stocks higher. However, the upside was limited due to concerns over the debt ceiling and a disappointing NY Fed Manufacturing survey. Additionally, Asian market sentiment was impacted by weaker-than-expected Chinese activity data. The mainland Chinese market remained subdued after disappointing Industrial Production, Retail Sales, and Fixed Assets Urban Investment all fell short of analysts' forecasts. Furthermore, it was reported overnight that Michael Burry, known for his 'Big Short' fame, increased his bullish bets on e-commerce giants JD.com and Alibaba.

UK investors are digesting this morning's release of UK employment market data showing slightly weaker numbers than anticipated. Unexpectedly, the unemployment rate rose from 3.8% to 3.9%, and regular pay growth (excluding bonuses) increased by a smaller margin than expected, reaching 6.7% compared to the previous 6.6%. While there are indications of an improvement in labour supply, it's worth noting that the Bank of England acknowledged this development last week following its twelfth interest rate increase in a row.

European investors will focus on the German ZEW survey for May that will offer an initial assessment of economic sentiment, primarily based on the views of institutional investors rather than businesses. Markets expect a decline in the expectations component, this would mark the third consecutive decrease, reaching the lowest level since December 2022. The recent down trend reflects financial market volatility, partly influenced by challenges faced by US regional banks. Additionally, the ZEW current situation index is also expected to decline.

Stateside, investors will focus on data deemed to support expectations of a pause in the Fed's interest rate policy. Today's focus lies on April's industrial production and retail sales figures. Markets expect a month-on-month increase in retail sales, marking the first rise in three months, however, this growth is likely driven by auto sales rather than broad-based strength. Industrial activity is expected to remain stagnant, aligning with recent softening in manufacturing surveys. US investors will also eye a bevy of central bank speakers on deck today, with Mester (2024), Bostic (2024), Logan (voter) and Williams (voter) all set to speak.

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.0815-20 (555M), 1.0895-1.0900 (680M), 1.0920 (306M)
1.0950-65 (925M), 1.0995-1.1000 (900M)
USD/CHF: 0.8850 (200M). EUR/GBP: 0.8740 (233M),
AUD/USD: 0.6700-10 (1.5BLN), 0.6760 (515M), 0.6800 (566M)
USD/CAD: 1.3305 (450M), 1.3640 (438M)
USD/JPY: 135.75 (280M), 136.00 (384M)

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)