Daily Market Outlook, February 29, 2024

Munnelly’s Market Minute…

“Markets Focus Shifts To US PCE Data Ahead Of Month End”

Equity markets in China are higher, while elsewhere in the Asian region they are more mixed. The Japanese Yen outperformed after a Bank of Japan board member hinted at a possible end to negative interest rates. Overnight the latest PMI indices for China will be of interest, reflecting ongoing concerns about the world’s second-largest economy. Chinese markets have experienced a significant upswing this month, outperforming global stocks by a considerable margin. This surge is attributed to a series of measures enacted by the government aimed at bolstering market confidence. Markets are optimistic and expect further support measures to be announced during the upcoming National People's Congress meeting.

UK Economic Outlook: The February Lloyds Business Barometer survey indicates a positive outlook for the UK economy despite a slight dip in overall confidence. Staffing level expectations are the highest in nearly two years, signaling optimism for future output. January money supply and bank lending data are expected to show a slight pickup in mortgage approvals, suggesting a tentative stabilization in the housing market.

Eurozone Inflation: European markets await tomorrow’s Eurozone flash CPI inflation estimate for February. National releases today from Germany, France, and Spain show a decline in EU-harmonized headline inflation rates.

US Data Focus: Yesterday's Q4 GDP for the US was revised down marginally but still reflects strong annualized growth of 3.2%. Today's focus is on the release of the January PCE deflator, the Fed’s preferred inflation gauge. PCE inflation is expected to show larger monthly rises compared to previous months but may still support Fed policymakers’ caution in loosening policy.

Overnight Newswire Updates of Note

BoJ Board Member Signals Exiting Negative Interest Rate Policy Is Closer
Japan Retail Sales Beat Expectations In Jan, Industrial Production Slides
RBNZ’s Orr Says RBNZ Rejected Hike As Data Show Inflation Slowing
Australian Treasurer Chalmers Warns Over Weak Economic Growth
US Lawmakers Strike Deal To Avoid Imminent Government Shutdown
Fed Officials Emphasize Data To Guide Pace Of Interest-Rate Cuts
ECB’s Nagel: Need To Stay The Course Until More Comforting Wage Data
BoE’s Mann: Wealthy Britons’ Spending Habits Make It Harder To Curb Inflation
UK Chancellor Hunt Considers Scrapping Non-Dom Tax Status At Budget
HP Q1 Revenue Declines At Lower Rate As Market Appears To Stabilize
Justice Department Looking Into Boeing Midair Door Plug Blowout
Disney, Reliance Sign $8.5 Bln Deal to Merge India Media Operations
Alibaba Unveils Big Cloud Price Cuts As AI Rivalry Intensifies

(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: 1.0860 (EU1.42b), 1.0900 (EU1.37b), 1.0855 (EU932.4m)
USD/JPY: 141.50 ($885.9m), 150.00 ($563m), 144.55 ($490m)
AUD/USD: 0.6820 (AUD668.6m), 0.6550 (AUD474.2m), 0.6510 (AUD440m)
USD/CAD: 1.3545 ($518.7m), 1.3080 ($480m), 1.3430 ($413.2m)
USD/CNY: 7.2000 ($1.54b), 7.3000 ($1.28b), 7.4000 ($488.4m)
USD/BRL: 5.0000 ($1.47b), 4.8500 ($966m), 4.7500 ($699m)
NZD/USD: 0.6150 (NZD350m), 0.6200 (NZD309.6m)
USD/MXN: 17.26 ($591.9m)
USD/KRW: 1475.00 ($309.3m)
Credit Agricole’s month-end rebalancing model indicates that there will likely be moderate USD selling across the board, with the strongest sell signal for USD vs CAD and AUD. Our corporate flow model suggests EUR selling at the end of the month. Therefore, we are using the signals from the standalone month-end rebalancing model for our combined strategy. They have entered a trade to sell the USD against a weighted basket of G10 currencies and intend to hold the position until 29 February at 17:00 GMT, unless stopped out of the trade.

CFTC Data As Of 20/02/24

Japanese Yen net short position is -120,778 contracts.
British Pound net long position is 46,312 contracts.
Euro net long position is 68,016 contracts
bitcoin net short position is -2,098 contracts.
Swiss Franc posts net short position of -9,923 contracts.
Equity Fund managers raise S&P 500 CME net long position by 17.027 contracts to 947,280.
Equity fund speculators increase S&P 500 CME net short position by 35.358 contracts to 419,832.