Market Update – June 14 – The Big Decision!

June 14, 2023

Cold feet and cautionary profit taking weighed on Treasuries heading into the FOMC decision Wednesday.

There were no surprises in the May CPI report and that supported market expectations that the Fed will remain on a “hawkish hold,” including likely boosts in the dots to leave the door open for a July hike. Current rate probabilities for 14 June presents an 89.6% chance for a pause today. Wall Street managed further gains, in large part on further momentum from big tech and AI, while in Asia sentiment held up overnight and the Nikkei closed 1.5% higher as Toyota shares rallied following the reappointment of its chairman and as markets expect the BoJ to confirm a continuation of the ultra-accommodative policy settings. European and US stocks are down today.

May ranked as the largest month of buying of US equities since 2010. US L/S net leverage rose to 12-month highs as a result of the buying. Mega-Cap TMT drove the bulk of the buying in North America pushing net exposure to these names to decade highs. Traditional defensive continued to be bought with May being the 4th largest month of buying since 2018.

FX – The USDIndex has remained within yesterday’s range and is at 103.36. EUR is at 1.0785. JPY holds above 140 while Cable broke 1.26 and holds above it as yesterday UK data boosted expectations of further BoE hikes and Sterling rallied as Gilt yields spiked.
Stocks – The JPN225 is up 1.5%, US500 has had its fourth consecutive increase close to 4,400, while US100 gained 0.8%.
Commodities – USOil – higher at $70. Gold – slightly higher at $1950.50 now.

Today – All eyes are on the FOMC decision as markets look ahead to the ECB announcement on Thursday, where Lagarde is expected to deliver another 25 bp hike.

Biggest FX Mover @ (06:30 GMT) USDJPY (+0.50%) Pulled back and steadied at 139.88. MAs aligning lower, MACD histogram & signal line decline but remain well above 0.

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Andria Pichidi

Market Analyst

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