Asia open: Baked beans or Lobster

Stephen Innes SPI Asset Management

Happy Monday Morning from Bangkok.

Broader market sentiment will likely tango to the mood music in Washington as the debt ceiling discussion evolves. President Joe Biden and House Republican Speaker Kevin McCarthy will meet after a reportedly"productive" phone call on Sunday as the president returned from the G7 summit. And while the mood is far doom, traders still have 2 feet on the pedals.

It seems pretty likely that a full-fledged deal will be reached before early June, but the timing is hard to predict. While negotiation strategy and political incentives imply a last-minute deal, we will soon find out if it's baked beans or lobster during the Memorial Day holiday.

The US Dollar is trading lower partly due to the debt ceiling standoff but more likely due to the Fed officials being more open to a June pause.

As global investors tap dance around the debt ceiling debate and with G-7 out of the way, it could be time to start rummaging through collateral damage in China after growth data fell off a cliff. Still, with the Yuan above 7.00 and the market unlikely to receive any immediate policy support, any upside will require China to regain positive momentum in industrial activity data or, failing that, the start of a Fed easing cycle.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

Bitcoin price slips below $67,000 ahead of US Nonfarm Payrolls data

Bitcoin price extends losses, and trades below the lower consolidating boundary at $67,300 at the time of writing. A firm close below this level could trigger a deeper correction for BTC. Despite the weakness in price action, institutional demand shows signs of support, recording mild inflows in ETFs so far this week.