Daily Market Outlook, June 5, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Asian stocks struggled to find a clear direction and showed modest movement as investors shunned long-term risky investments in anticipation of Friday's US payroll report. Treasuries remained steady during Asian trading. On Wednesday, bonds experienced gains in all categories due to data indicating a decline in US service sector activity and a slowdown in hiring. Fed Speaker Kashkari highlighted signs of a softening labour market in his latest remarks overnight. This observation aligns with the weak 37,000 employment gain reported in yesterday’s ADP data for May. In response, U.S. Treasury yields have remained at lower levels, influenced by the disappointing ADP report and the subsequent weaker-than-expected Services ISM report, which narrowly indicated a contraction in activity for May.  Additional insights came from the Fed’s Beige Book, which noted that "economic activity has declined slightly since the previous report." Interestingly, the report also revealed widespread expectations among businesses of faster increases in costs and prices, reflecting a divergence between economic activity and inflation outlooks—a sentiment echoed in the Services ISM data. Ahead of tomorrow's payroll report, the subdued focus on economic activity and the labour market appears to dominate U.S. Treasury sentiment, overshadowing the CBO's projection that Trump's tax cuts will add $2.4 trillion to the deficit by 2034. Outside the U.S., Japan held another weak JGB auction, this time for 30-year bonds, drawing attention to the upcoming Bank of Japan (BoJ) meeting on June 16-17. The market is anticipating potential changes to quantitative tightening (QT) measures that could stabilise the bond market. Despite a lower cover ratio of 2.92x compared to the 3.39 average and a long auction tail of 3.4 basis points, 30-year bond yields have rallied slightly, falling 2-3 basis points below the 2.904% average auction yield.

Thursday’s ECB rate decision is expected to be straightforward, with the Governing Council likely to implement another 25bps cut, bringing the benchmark Deposit rate down to 2.0%. Recent data supports this easing stance, with flash May inflation falling below 2% and core HICP showing a sharper improvement, dropping 0.4 percentage points to 2.3% year-on-year. The stickier services index also declined to 3.2% year-on-year from 4.0%. These trends are underpinned by weak demand and a continued moderation in wage pressures. Additionally, external uncertainties pose downside risks to growth while contributing to lower inflation through reduced import prices, including energy and commodities. The recovery of the single currency further reinforces these dynamics. The updated macroeconomic projections are likely to reflect these factors through downward revisions to HICP. Although hawks may raise concerns about looser fiscal policies and increased defence spending, such factors are unlikely to present immediate inflationary risks. In fact, focussing on infrastructure and capital spending in these programs could enhance supply-side efficiency and productivity over time. President Lagarde is expected to maintain her pragmatic approach, keeping the door open for further rate cuts while emphasising prevailing uncertainties. This approach aligns with the ECB’s preference to avoid providing specific forward guidance at this stage.

Aside from the ECB today’s macro slate includes: BoE DMP, US IJC & Challenger job cuts, UK & German construction PMI. Central bank speakers: Greene, Breeden, Kugler & Harker.

Overnight Headlines

  • ECB Poised For Next 25bp Rate Cut As EU–US Trade Feud Ramps Up

  • EU Presses China Over ‘Alarming’ Rare Earth Export Controls

  • China Caixin Services PMI For May Grows Despite Tariff Concerns

  • China’s Power Prices Nosedive In Relief To Tariff-Hit Factories

  • Australia Trade Balance Misses In April Amid Tariff Headwinds

  • Trump Bans Travel Into US From 12 Countries

  • US Doubles Steel, Aluminum Tariffs, Japan Hopes For Breakthrough

  • Israeli PM Netanyahu’s Coalition At Risk As Allies Consider Exit

  • Kashkari: Fed Well Positioned To Wait For Tariff Impact

  • EU Picks 13 New Critical Material Projects, Including In Greenland

  • US Economic Activity Ebbs, Prices Rise In Fed Beige Book

  • Trump Budget Targets BLS, Raising Economic Data Quality Fears

  • Dollar Tree Forecasts Weak Q2 Profit On Tariff Uncertainty

  • Nvidia Director Proposes To Sell $550M Worth Of Shares

  • Amazon To Invest $10B In North Carolina For AI Infrastructure

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • USD/JPY: 141.00 (760M), 141.45-50 (828M), 142.00 (1.6BLN)

  • 142.30-40 (392M), 142.50-55 (668M), 142.65-75 (1.4BLN)

  • 143.00-05 (1.91BLN), 143.35-40 (500M), 143.45-50 (1.12BLN)

  • 143.60-65 (300M), 144.15 (235M), 144.39 (645M)

  • EUR/JPY: 162.00 (571M), 163.00 (425M), 167.00 (540M)

  • USD/CHF: 0.8175 (545M), 0.8190-00 (1.52BLN), 0.8220 (618M)

  • EUR/CHF: 0.9220 (200M), 0.9460 (546M)

  • GBP/USD: 1.3475-85 (275M), 1.3550 (207M)

  • EUR/GBP: 0.8345-50 (575M), 0.8360 (357M), 0.8395-00 (645M)

  • 0.8500 (352M)

  • AUD/USD: 0.6360 (220M), 0.6400 (420M), 0.6425 (420M)

  • 0.6455-65 (1.0BLN), 0.6485-95 (2.6BLN), 0.6550 (301M)

  • NZD/USD: 0.5895-00 (442M), 0.5990 (44

  • USD/CAD: 1.3590-00 (721M), 1.3760-75 (671M)

  • USD/ZAR: 18.00-0250 (275M)

CFTC Data As Of 30/5/25

  • The net long position in Japanese yen stands at 164,012 contracts, while the euro net long position is at 79,474 contracts. The British pound holds a net long position of 35,379 contracts. Conversely, the Swiss franc indicates a net short position of -25,483 contracts, and Bitcoin shows a net short position of -2,274 contracts. 

  • Equity Fund Managers have reduced their net long position in the S&P 500 CME by 17,892 contracts, bringing it down to 854,528 contracts. Moreover, Equity Fund Speculators have decreased their net short position in the S&P 500 CME by 39,763 contracts, resulting in a total of 257,465 contracts. 

  • Speculators have also cut their net short position in CBOT US Treasury bonds futures by 18,143 contracts, which now stands at 53,890 contracts. Similarly, CBOT US Ultrabond Treasury futures' net short position has been lowered by 12,663 contracts to 233,472 contracts. The net short position for CBOT US 2-Year Treasury futures has been trimmed by 147,428 contracts to reach 1,119,903 contracts. Additionally, the net short position for CBOT US 10-Year Treasury futures has been reduced by 81,827 contracts to 769,604 contracts. On the other hand, speculators have increased their net short position in CBOT US 5-Year Treasury futures by 57,296 contracts, leading to a total of 2,333,237 contracts.

Technical & Trade Views

SP500 Pivot 5900

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 5900 target 6100

  • Below 5800 target 5610

EURUSD Pivot 1.11

  • Daily VWAP bullish

  • Weekly VWAP bullish 

  • Above 1.11 target 1.19

  • Below 1.1060 target 1.09

GBPUSD Pivot 1.3290

  • Daily VWAP bullish

  • Weekly VWAP bullish 

  • Above 1.3290 target 1.38

  • Below 1.32 target 1.31

USDJPY Pivot 147

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Above 147.10 target 148.26

  • Below 146.53 target 139

XAUUSD Pivot 3365

  • Daily VWAP bullish

  • Weekly VWAP bearish 

  • Above 3400 target 3600

  • Below 3365 target 2981

BTCUSD Pivot 105k

  • Daily VWAP bearish

  • Weekly VWAP bullish 

  • Above 105k target 118k

  • Below 103k target 100k