1 Minute Market Rundowns - brought to you by the BCB Trading Team

This Daily Digest will cover:

• Debt ceiling progress
• USD holds on to gains

The sunshine wasn’t the only good thing to come out of this bank holiday weekend. As the UK returned to work, markets were met with some positive traction on the US debt ceiling deal. Biden and House Speaker Kevin McCarthy have brokered a deal to suspend the $31.4tn debt ceiling until 2025. This passed a key hurdle yesterday evening and will now go to the House of Representatives. The debt ceiling talks have been largely political and as such, markets have been trading on the assumption a deal would go through. Nevertheless, the US dollar trades bid this morning with some of its gains possibly attributed to the progress.

As talks around the debt ceiling hopefully come to an end, the spotlight should focus back on to the Fed and their plan on how to combat the sticky inflation. With headline & core PCE coming in higher on Friday and durable goods printing 1.1% vs -1%, discussions around rate pauses have stopped and markets have now fully priced in one additional 25bps hike by July’s meeting and a 66% chance of this hike occurring earlier at the 14 June meeting.

With the FTSE down 4.5% this month and US stocks up, we expected some cable buyers to emerge yesterday as portfolios were rebalanced for month-end. This came to fruition and saw GBPUSD trading at 1.2445. Despite this, Cable and EURUSD are currently trading over 100 points lower than the start of last week and my view is that the dollar continues to hold on to these gains until at least the June meeting. We’ll get some more colour here with several Fed members speaking and JOLTS today, ADP tomorrow and NFP on Friday.

Despite the inflationary data, stocks marched higher into Friday close that continued on Monday. Fuelled by Nvidia and progress with debt ceiling negotiations and with the inflation still proving sticky, I feel we’ll see US stocks give back some gains this week.

Cross yen took a bit of a beating yesterday as BOJ, MOF and FSA officials met and hinted that, if needed, they would respond to a weakening yen, stating that “If necessary, we won’t rule out every option available”. However, I can see yen remaining on the backfoot as long as the ultra loose monetary policy persists. This doesn’t look to change anytime soon, especially given the recent miss in month-on-month output figures (-0.4% vs expected 1.4%).

BTC and ETH remained relatively resilient to inflationary pressures and made gains over the weekend before giving them back this morning. US data over the next week will be key to see where crypto goes next.

As always, good luck.

Diogo Da Silva
OTC Trader

This Daily Digest will cover:

• Crypto asleep but narrowing range should point to a larger move coming
• FED speakers last week on the hawkish side
• Risk looking strong but debt ceiling holds the key

I promised last week that I would not mention the debt ceiling again but sadly I am forced to. Stocks and risk markets saw a strong move higher late Thursday on reports of a deal to raise the debt ceiling being close. This has not materialised as yet but shows how the market is likely to react when an 11th hour deal is done. The deadline of June 1st looms large but the sides feel close to me which puts me into dip buying mode this week as I remain certain a deal will be pushed through at some point.

FX and Crypto had a week to forget as little fresh money was put to work and we really feel like we are stuck in listless, trendless ranges still. EUR/USD has bounced from its lows but at 1.0800 this morning is basically a coin toss. USD/JPY is more interesting as it pushes recent highs above 138 and eyes up 140. Short USD/JPY was a lot of people’s trade of the year and it has not worked so momentum could gather pace if we hold above 136.50/137.00.

Crypto is frankly asleep. Ranges are familiar and momentum is non-existent. However, tight ranges like this are often a precursor of a larger quick move. Watch 25,800/27,500 and 1710/1860 for signs of a break that should not be faded in my opinion.

FOMC minutes on Wednesday, Core PCE on Thursday and debt ceiling developments dominate a very quiet calendar this week.

As always, good luck.

Richard Usher
Head of OTC Trading

This Daily Digest will cover:

• Crypto steady awaiting momentum

• USD strengthens in an orderly fashion

• Fed speakers hawkish thus far this week

• OK, I will reluctantly talk about the debt ceiling

On Monday I talked about how the markets were lethargic and lacking direction. Well frankly nothing has changed and risk reduction remains the key theme as the USD bounces back from a tough start to the year. EUR/USD is trading 1.0835 as I type having failed at the flagged supply overhang yesterday above 1.0900. US yields are ticking higher as a full roll of Fed speakers this week have thus far been hawkish. The key speaker as always is Jerome Powell who speaks on Friday and frankly matters. One thing that caught my eye yesterday was Canadian inflation that was expected to fall but actually rose. They have been slightly ahead of the U.S with their cycle so there is reason to be fearful that they could be showing the way…

Crypto remains quiet and can be read glass half full or empty depending on your view. Holding onto the recent bounce and consolidating before another leg higher if you are bullish, or unable to build on a fairly weak bounce if you are bearish. Frankly we need fresh news or impetus before we can get going again and PEPE is not going to provide it!

What may provide the impetus, and I stress may, is the debt ceiling issue that is on the horizon. I have consciously not discussed this as it is a red herring that I have encountered so many times in my career that it bores me. However, it would be remiss not to briefly muse on the situation. June 1st is when Yellen has suggested the government will run out of money without the debt ceiling being raised. This won’t happen, and a deal will be fudged just before or briefly afterwards – it always does, and always will, once the ridiculous political posturing is finished. The worst case is a short term Government shutdown which has happened before but generally under slightly crazier leaders than Biden. Stocks and risk may stay offered as we get towards the end of the month as the fear increases but any sell off will not last (at least not because of this issue) as it will be resolved.

I promise I won’t mention it again…

As always, good luck.

Richard Usher
Head of OTC Trading