Daily Market Outlook, November 3, 2023

Daily Market Outlook, November 3, 2023Munnelly’s Market Commentary… Asia –  stocks experienced gains as they followed the upward movement in global markets. This rise came after the Bank of England (BoE) decided to maintain interest rates and a surprising decrease in US Labour Costs added to a dovish tone. Japan's market was closed for a holiday, and there was a disappointing Caixin Services PMI, but this did not halt the overall positive momentum. The Hang Seng in Hong Kong and the Shanghai Composite in China followed the general optimistic mood, largely ignoring weaker Chinese Caixin PMI data and another significant liquidity drain by the People's Bank of China (PBoC).Europe – after the Bank of England's recent decision to maintain interest rates, MPC members Pill and Haskel are scheduled to address the public today. Notably, Mr. Haskel was one of the three committee members who dissented from the decision to keep rates at 5.25%, advocating for a quarter-point increase to 5.50%. In contrast, Mr. Pill, the Bank's chief economist, was aligned with the majority, favouring unchanged interest rates. The committee conveyed a resolute message, emphasising the necessity of maintaining a restrictive policy stance for an extended duration. However, this commitment was weighed against inflation forecasts that indicated a potential undershoot of the 2% target over a three-year horizon if interest rates remained at 5.25%, suggesting a heightened probability of a future rate cut. On the data front, markets anticipate that the final October reading of the UK services PMI will remain consistent with the initial 'flash' estimate, marking the third consecutive month below the critical 50 level. The majority of the MPC cited evidence of a slowdown in economic activity as a significant factor underpinning their decision to keep interest rates unaltered.US – Stateside, later today, the US will release its labour market report, which is expected to reveal another substantial increase in employment (210k), albeit lower than September's figure (336k). The unemployment rate is predicted to edge down slightly to 3.7%, reflecting a tight labour market. Nevertheless, monthly wage data have indicated more modest gains, and this trend is anticipated to persist in the upcoming report. This could provide Federal Reserve policymakers with reassurance that there is no imperative need for further rate hikes. Additionally, the US services ISM is projected to show a slight moderation, slipping from 53.6 to 53.5, which is indicative of weakening demand. Alongside the data releases, several Federal Reserve speakers, including Barr, Barkin, Kashkari, and Bostic, are scheduled to speak today, which could attract market attention throughout the day given the markets reaction toWednesday’s FOMC policy update and the markets perception that the FOMC are now likely on hold.FX Positioning & Sentiment FX ptions are indicating the expected FX market reaction to the upcoming Non-Farm Payrolls (NFP) data. The overnight (o/n) expiry options now extend until Monday, November 6, but they still encompass the release of the NFP data on November 3. The initial premium for options that include the NFP data was relatively subdued on Thursday, but it increased slightly on Friday. For instance, the overnight premium for EUR/USD went from 46 USD pips on Thursday to 54 on Friday, while USD/JPY went from 65 JPY pips to 70 JPY pips, and AUD/USD increased from 40 USD pips to 43 USD pips. However, these prices are similar to those observed before the release of NFP data in October and September. The absence of significant additional FX volatility risk premium suggests that the FX market's breakout risk remains low. Nevertheless, FX dealers are not complacent. Recent implied volatility losses for other expiry dates have halted, at least for the time being.CFTC Data As Of 27-10-23USD net spec long up a touch in Oct 18-24 period; $IDX rose 0.03% in periodSince period closed ECB dovish hold & Japan CPI may moot period adjustmentsEUR$ +0.12% in period, specs -2,843 contracts; weak growth trump inflation$JPY +0.05%, specs +3,029 contracts now -99,629; pair hovers near 150GBP$ -0.16% in period specs -18,636 contracts; dovish BoE rate view weighsAUD, NZD net spec short grew amid low rates, growth view; weak China growth$CAD +0.67% in period, weak global growth and stagnant BoC rates weighBTC +18.2% period, specs sell 781 contracts flip to short, BTC steady sinceEnd of developed mkt hikes and global growth remain key determinants ( Source Reuters)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0500 (1.8BLN), 1.0520-30 (1.2BLN), 1.0575-90 (2.1BLN)1.0600 (2.4BLN), 1.0635 (431M), 1.0660 (700M), 1.0690-1.0700 (1.4BLN)USD/CHF: 0.9050 (766M).GBP/USD: 1.2100 (1.1BLN), 1.2130 (400M), 1.2150 (813M), 1.2200 (544M)1.2300 (545M).EUR/GBP: 0.8635-45 (800M), 0.8815 (400M). EUR/SEK: 11.80 (358M)AUD/USD: 0.6450 (1.9BLN), 0.6500 (755M) . NZD/USD: 0.5880 (203M)USD/CAD: 1.3700-05 (2.7BLN), 1.3720 (409M), 1.3750 (1.1BLN), 1.3765 (406M)USD/JPY: 149.00 (1.5BLN), 149.50 (1.25BLN), 150.00 (1.5BLN), 150.50 (1.1BLN)151.00 (2.6BLN), 151.50 (526M), 151.75 (400M), 152.00 (435M)Overnight Newswire Updates of NoteNZ’s Final Election Count Means Incoming Premier Luxon Needs Broader SupportECB's Schnabel: ECB Can’t Close Door To Further Rate HikesUK PM Sunak Says UK Election Probably Next Year, Making 2025 UnlikelySam Bankman-Fried Convicted Of Fraud Over FTX’s CollapseDollar Eases As Traders Bet Fed Done With Rate HikesOil Heads For Second Weekly Drop As Israel War Still ContainedApple Stock Falls After Cautious Outlook Overshadows Record iPhone QuarterParamount Global Sees Q3 Profit Rise, Despite TV HeadwindsSocGen Q3 Earnings Beat Estimates As Investment Bank Offsets French SlumpUAW-Stellantis Deal Includes $18.9 Bln In Investments, New Truck For Idled PlantUAW President Is Ready To Take On Tesla And Beat Elon Musk(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 4260Below 4200 opens 4180Primary support 4200Primary objective is 440020 Day VWAP bearish, 5 Day VWAP bullishEURUSD Bias: Bullish Above Bearish Below 1.0580Below 1.05 opens 1.04Primary support 1.05Primary objective is 1.0720 Day VWAP bearish, 5 Day VWAP bullishGBPUSD Bias: Bullish Above Bearish Below 1.22Below 1.21 opens 1.1950Primary support  is 1.2069Primary objective 1.236020 Day VWAP bearish, 5 Day VWAP bullishUSDJPY Bias: Bullish Above Bearish Below 150Below 149 opens 148.50Primary support 147.30Primary objective is 152.5020 Day VWAP bullish, 5 Day VWAP bullishAUDUSD Bias: Bullish Above Bearish Below .6400Above .6475 opens .6525Primary support .6280Primary objective is .662020 Day VWAP bearish, 5 Day VWAP bullishBTCUSD Bias: Bullish Above Bearish below 32000Below 27100 opens 26500Primary support  is 30000Primary objective is 3700020 Day VWAP bullish, 5 Day VWAP bullish