Daily Market Outlook, May 6, 2025
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute…
Global stock markets remained in a tight range on Tuesday, and the dollar regained some of its recent losses against Asian currencies as investors' apprehensions about U.S. tariffs and their potential effects on economic growth resurfaced. These concerns, along with commitments from major oil producers to increase supply, also contributed to crude prices hovering near four-year lows. The inconsistent trade policies of U.S. President Donald Trump has triggered notable waves of dollar selling since April, as investors moved away from U.S. assets, resulting in gains for the euro, yen, and Swiss franc. Investors are reducing their aggressive selling of the U.S. dollar after the Taiwan dollar experienced a central bank instigated surge alongside other Asian currencies. However, this pause keeps attention on the consequences of unpredictable U.S. trade policies. The absence of specific information regarding any trade agreements between the U.S. and its counterparts has left investors feeling uncertain, anxious, and eager for positive developments. The positive outlook from the previous week, triggered by Beijing's announcement that it was considering Washington's proposal for trade discussions, now feels a distant memory
European stock futures indicate a sluggish start as markets await the Federal Reserve's policy announcement on Wednesday. While the central bank is expected to maintain current interest rates, its statements could significantly influence market sentiment. Prior to this, the European Purchasing Managers' Index (PMI) data for April, scheduled for release on Tuesday, will underscore the disruptions resulting from U.S. President Donald Trump's variable tariff policies. Investors are also keeping an eye on European automakers following Ford Motor's decision to suspend its annual forecast amidst uncertainties surrounding the U.S. market. Additionally, while the unprecedented movement of the Taiwan dollar has caught attention, notable currency volatility has also been seen across Asia. For instance, the Malaysian ringgit jumped nearly 1.5% on Monday to reach its strongest level since October. Although it has weakened since then, it remains close to this key milestone. Meanwhile, Hong Kong's de facto central bank intervened in the foreign exchange market on Tuesday after the currency reached the upper limit of its trading band for the fourth time this month. The widespread decline of the U.S. dollar against Asian currencies has led to speculation that regional economies might be inclined to allow their currencies to appreciate in order to obtain trade concessions from the U.S.
Despite a UK holiday yesterday, other global markets remained open. In the US, a key development was the April non-manufacturing ISM survey, which delivered an upside surprise. The headline index rose to 51.6, up from 50.8, surpassing expectations of a decline to 50.2. A reading above 50 signals expansion. This improvement in the service sector's activity was driven by a rebound in new orders (sub-index increased to 52.3 from 50.4) and a slower pace of employment decline (49.0 from 46.2). However, it would be overly simplistic to interpret these headline figures without context. A sharp rise in the price index coincided with a more pronounced drop in imports. While business activity currently remains resilient (pink line), sustaining this momentum may prove challenging if businesses are importing fewer components needed for production and if production costs continue to escalate rapidly. This stagflationary scenario will likely dominate discussions at tomorrow’s Fed decision, where Powell is expected to emphasise the inflation aspect of the mandate. For the Bank of England’s meeting on Thursday, there seems to be greater room for a dovish shift, given weaker business surveys and a more nuanced assessment of tariffs' inflationary impact. Meanwhile, there was no US Treasury trading during Asian hours due to a Japanese holiday, and the Dollar Index remains largely unchanged from Friday’s London close.
Overnight Newswire Updates of Note
Fed Confronts Lose-Lose Scenario Amid Haphazard Tariff Rollout
CBO Chief Still Sees US Treasury ‘X-Date’ Coming Late Summer
Credit Suisse Pleads Guilty To US Tax Crimes, To Pay Over $510M
EU, UK Companies Lay Bare The Pain From Trump’s Trade War
Big Four Accounting Firm PwC To Slash 1,500 US Jobs
Ford Suspends 2025 Guidance Amid $2.5B Tariff Impact
Palantir Sales Forecast Falls Short Of Wall Street’s Hopes
US Seeks Forced Sale Of Google Ad Technology Products
New Tesla Sales In Spain Drop 36% In April Despite EV Sales Surge
Oil Futures Edge Higher, Supported By Middle East Tensions
XAU Jumps To Weekly Top As Risks Underpin Safe-Haven Assets
Aussie Keeps Near Red As USD Firms Up, China PMI Disappoints
China Job Market Pain Tests Beijing's Trade War Resolve
Chinese Exporters Undervalue Cargo To Skirt Trump Tariffs
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1195 (1BLN), 1.1275 (538M), 1.1325 (1.4BLN), 1.1350 (414M),
1.1385 (433M), 1.1400 (851M)
GBP/USD: 1.3350 (284M)
EUR/GBP: 0.8475 (271M), 0.8500-05 (638M), 0.8525 (397M)
EUR/SEK: 10.9595 (541M). AUD/NZD: 1.0800 (605M)
AUD/USD: 0.6350 (606M), 0.6425 (242M), 0.6500 (1.1BLN)
USD/CAD: 1.3815-20 (480M), 1.3825-30 (787M), 1.3845-50 (716M)
USD/JPY: 142.00 (1.2BLN), 142.50 (455M), 143.00 (507M)
143.95-144.00 (563M), 144.50-55 (1BLN), 145.00 (678M)
CFTC Data As Of 2/5/25
Equity fund managers have increased their net long position in S&P 500 CME by 18,407 contracts, bringing the total to 826,250. Meanwhile, equity fund speculators have reduced their net short position in S&P 500 CME by 10,014 contracts, now totaling 249,462.
Speculators have also decreased their net short position in CBOT US Treasury Bonds futures by 22,131 contracts, which now stands at 85,556. Conversely, speculators have raised their net short position in CBOT US Ultrabond Treasury futures by 3,792 contracts, reaching 251,394. The net short position in CBOT US 2-year Treasury futures has been trimmed by 91,618 contracts, totaling 1,206,377. Additionally, there has been an increase in the net short position for CBOT US 5-year Treasury futures by 101,110 contracts, now at 2,292,544. Speculators have also cut their net short position in CBOT US 10-year Treasury futures by 34,569 contracts, down to 871,537.
The net long position for Euro stands at 75,797 contracts, while the Japanese yen's net long position is 179,212 contracts. The Swiss franc holds a net short position of -24,314 contracts, and the British pound has a net long position of 23,959 contracts. Lastly, Bitcoin's net short position is -1,231 contracts.
Technical & Trade Views
SP500 Pivot 5610
Daily VWAP bullish
Weekly VWAP bullish
Above 5640 target 5790
Below 5500 target 5385
EURUSD Pivot 1.11
Daily VWAP bearish
Weekly VWAP bullish
Above 1.12 target 1.19
Below 1.1070 target 1.0945
GBPUSD Pivot 1.28
Daily VWAP bearish
Weekly VWAP bullish
Above 1.34 target 1.38
Below 1.29 target 1.27
USDJPY Pivot 147.70
Daily VWAP bullish
Weekly VWAP bullish
Above 1.52 target 153.80
Below 146.53 target 139
XAUUSD Pivot 3100
Daily VWAP bullish
Weekly VWAP bullish
Above 3200 target 3640
Below 3000 target 2950
BTCUSD Pivot 96.7k
Daily VWAP bearish
Weekly VWAP bullish
Above 97k target 105k
Below 95k target 65k
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!