Daily Market Outlook, August 3, 2023

Daily Market Outlook, August 3, 2023Munnelly’s Market Commentary… Asian equity markets have largely followed the weakness seen in global peers, including Wall Street. The US rating downgrade, AMD earnings, and hot ADP data have put pressure on both stocks and bonds. However, some of the losses in Asia were stemmed as participants digested the latest Chinese Caixin Services and Composite PMI figures.Specifically, the Nikkei 225 in Japan was down 1.3%, mainly due to higher Japanese yields and newsflow dominated by earnings. The Hang Seng in Hong Kong and the Shanghai Composite were choppy, briefly recovering from their opening losses following mixed Chinese Caixin Services and Composite PMI data. While Services surpassed forecasts at 54.1 (versus an expectation of 52.5), the Composite reading slowed to 51.9 (from a previous reading of 52.5).The main focus of the day will be the Bank of England's policy announcement. The Monetary Policy Committee (MPC) is expected to increase interest rates for a 14th successive meeting. The key uncertainty is the magnitude of the rate hike, with expectations ranging between a 25bps and 50bps point increase. The forecast suggests that the MPC may follow up June's 50bps point hike with another move of the same magnitude, lifting the Bank Rate from 5.00% to 5.50%. However, the risks of a smaller 25-basis point rise are also high, considering the downside surprise in June's CPI inflation (7.9%) and the softening in consumer confidence and PMIs for July. The BoE's guidance on future policy after August will be closely watched, with expectations that it will leave the door open for more tightening. The Bank's new economic forecasts, based on updated market interest rate expectations, will also be published. The market pricing for interest rates had recently risen to about 6%, and the Bank may address concerns if it leads to the inflation forecast undershooting its target in the medium-term horizon.Governor Bailey and MPC members will hold a press conference at 12.30 BST to provide further insights.Additionally, the final readings of services PMIs in the UK and Eurozone will attract limited attention, with a greater focus on the US services ISM report. The US services ISM is expected to soften to 53.0 in July, signalling robust expansion across the sector despite the decline from June's strong reading of 53.9.CFTC Data As Of 25-07-23USD net spec short grew in Jul 19-25 period, $IDX +1.34% in periodRates remain key driver, after period close Fed, ECB lilted dovishBoJ adjusted YCC JGB 10-yr intervention lvl to 1%, yen whipsawedEUR$ -1.52% in period, specs -1,602 contracts now -177,230$JPY +1.34% in period, specs +12,487 into strength now -77,752GBP$ -1%, specs -4,734 contracts, now +58,995; after below f/c CPIAUD$ -0.3% in period, specs -800 contracts; $CAD +0.03%, specs +5,009BTC -1.86% in period specs +516 contract by trend lows now -645 contracts(Source: Reuters)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0895-1.0905 (4.1BLN), 1.0915 (1.6BLN), 1.0920-30 (1.8BLN),1.0950-60 (825M), 1.1000-15 (2.7BLN), 1.1030 (606M), 1.1100-10 (1.2BLN)GBP/USD: 1.2525 (590M), 1.2895-1.2900 (334M)EUR/GBP: 0.8450 (200M), 0.8750-55 (593M)AUD/USD: 0.6530 (288M), 0.6550 (304M), 0.6640-50 (380M)EUR/AUD: 1.6600 (377M). AUD/JPY: 95.00 (330M), EUR/JPY: 156.70 (259M)USD/JPY: 142.00 (631M), 143.60-65 (1BLN), 143.90-95 (1.2BLN)Options Market PositioningOvernight GBP expiry implied volatility confirms this heightened volatility expectation.Despite the increased volatility anticipation, the actual demand for GBP volatility seems to be subdued. Dealers note that there is more interest in buying GBP volatility protection for the August 16 CPI data release, indicating that market participants are cautious about potential price movements in the aftermath of the CPI data.In the EUR/USD pair, implied volatility has reached a peak for the time being. The two-week implied volatility traded at 7.35 on a volume of 400 million euros, while the one-month implied volatility reached new recent highs at 7.1. This indicates that traders are expecting significant price swings in the EUR/USD pair over the next two weeks and one month. One-month expiry risk reversals also show a marginal increase in EUR put over call vol premiums to 0.3. This suggests that traders are paying a slightly higher premium for protection against potential downside moves in the EUR compared to upside moves over the one-month period.Overnight Newswire Updates of NoteAsian Shares Hesitant After Wall Street Sell-Off, Dollar BuoyantChina Services Activity Surprisingly Picks Up In Private SurveyChina Says It Is Willing To Keep Talking With US On Foreign Minister VisitBoJ Enters Bond Market For Second Time This Week As Yields RiseUK Tech Minister: UK Chip Sector Can’t ‘Recreate Taiwan In South Wales’Brazil Kicks Off Easing Cycle With Surprise Half-Point Interest Rate CutDollar Stands Tall As US Economic Resilience Trumps Fiscal UncertaintyAckman Says He’s Short 30-Year Treasuries On SupplyQualcomm Forecasts Sales Below Estimates As Smartphone Slump PersistsOccidental Petroleum Profit Misses Estimates On Lower Energy PricesPayPal Sees Pressure On Margin With Loan Provisions ClimbingEnergy Transfer Reports Lower Q2 Earnings, Weighed By NatGas PricesMcKesson Lifts Annual Profit Forecast After Strong Quarterly ResultsSocGen Beats Q2 Estimates On Cost Control, Car Leasing Unit(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Intraday Bullish Above Bearish Below 4520Below 4500 opens 4480Primary support is 4370Primary objective is 463020 Day VWAP bearish, 5 Day VWAP bearishEURUSD Intraday Bullish Above Bearsih Below 1.1020Below 1.890 opens 1.0830Primary support is 1.830Primary objective is 1.1320 Day VWAP bearish, 5 Day VWAP bearishGBPUSD: Intraday Bullish Above Bearish Below 1.28Below 1.2750 opens 1.2650Primary support  is 1.26Primary objective 1.385020 Day VWAP bearish, 5 Day VWAP bearishUSDJPY Bullish Above Bearish Below 139.60Above 143.50 opens 145Primary resistance 143.40Primary objective is 136.2020 Day VWAP bullish, 5 Day VWAP bullishAUDUSD Intraday Bullish Above Bearish Below .6660Above .6750 opens .6820Primary resistance  is .6730Primary objective is .646620 Day VWAP bearish, 5 Day VWAP bearsihBTCUSD Intraday Bullish Above Bearish below 30000 Below 29400 opens 28300Primary support  is 28300Primary objective is 3275020 Day VWAP bearish, 5 Day VWAP bearish