U.K. core CPI up from 5.8% to 6.2% year-over-year in February vs. estimated drop to 5.7%
Central bank updates:
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ECB Chairperson Lagarde clarified that, while price stability goes with financial stability, these are addressed by different policy tools
- ECB official Kazaks pointed out that their rate hike path could stay the course if market volatility calms down, but Stournaras noted that they might reach the end of their tightening cycle soon
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RBA Assistant Governor Kent spoke of slower cash flow rates in Australia but did not sound off concerns related to banking liquidity issues
- FOMC hiked interest rates by 0.25% to 5.00% as expected but warned that tighter credit conditions are in the cards for households and businesses
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SNB hiked interest rates from 1.00% to 1.50% as expected, with Chairperson Jordan citing that they could not rule out additional increases in rates to ensure price stability
- BOE increased interest rates by 0.25% in a 7-2 vote, although Governor Bailey hinted that the stronger than expected February CPI might be followed by a decline in price levels for the rest of the year
- At Friday’s Euro Summit, ECB President Lagarde told EU leaders that the euro-area banking sector is strong.
Intermarket Weekly Recap
German ZEW economic sentiment index tumbled sharply from 28.1 to 13.0 vs. 14.9 consensus in March, as banking sector troubles weighed heavily on confidence
A bit of calm was observed in the markets on Tuesday, with investors warming up to the idea of a scaled down Fed interest rate hike (from 0.50% to 0.25%) as the central bank would likely account for the fresh round of banking sector driven headwinds.
Eurozone consumer confidence index stayed unchanged at -19 instead of improving to estimated -18 figure in March, leaving sentiment below its long-term average
However, Governor Bailey noted that the February inflation surprise might be a one-off since they expect price pressures to ease sharply over the rest of the year. Short-term gilt yields advanced after the official announcement before paring gains and ending 20bps lower on the day.
Overlay of AUD Pairs: 1-Hour Forex Chart
That was taken as a signal by traders of little faith that the banking sector’s issues are not over yet despite reassurances of stability from government and banking officials this week. Risk assets broadly fell throughout the morning London session before calming down ahead of the U.S. session open. This was likely a response to comments from European Central Bank President Christine Lagarde and German Chancellor Olaf Scholz that the euro area banking sector is strong.
Most Notable FX Moves
USD Pairs
Canada new housing price index for February: -0.2% m/m vs. -0.1% m/m forecast (-0.2% m/m previous)
Coinbase gets “Wells notice” from SEC, which means that the regulator will bring enforcement action against the exchange, possibly related to institutional offering Coinbase Prime
Equities still managed to pull higher after an initial bearish FOMC reaction, as the likelihood of slower hikes and even the possibility of rate cuts could offer some relief down the line.
Russian President Putin praised Xi for his proposal to end the war in Ukraine, citing that it could be a basis for striking a deal with the West
U.S. initial jobless claims came in lower than expected at 191K versus 198K consensus and previous 192K figure
Global risk-off flows returned on Friday, once again focusing the banking sector as Deutrsche Bank and UBS shares sunk in price. This was likely catalyzed by the sudden spike higher in Deutsche Bank’s five-year credit default swaps (CDS) on Thursday, then once again on Friday.
U.S. Flash Manufacturing PMI for March: 49.3 vs. 47.3 previous; Services PMI at 53.8 vs. 50.6
The Federal Open Market Committee hiked the benchmark interest rate by 0.25% on Wednesday to a new range of 4.75% and 5.00%; sees greater uncertainty ahead due to stress in the banking system
U.S. Durable Goods Orders in February: -1.0% m/m vs. -5.0% m/m in January; core durable goods orders was flat vs. +0.2% m/m forecast & +0.8% m/m previous read
JPY Pairs
Australia’s flash manufacturing PMI for March fell from 50.5 to 48.7 to reflect industry contraction, as demand conditions deteriorated
January Canadian retail sales rose 1.4% m/m to $66.4B; core retail sales—excluding gasoline stations and fuel suppliers and motor vehicle and parts dealers—rose 0.5% m/m
منبع: https://www.babypips.com/news/weekly-forex-market-recap-2023-03-24
Overlay of GBP Pairs: 1-Hour Forex Chart
U.K. retail sales surged 1.2% month-over-month in February vs. projected 0.2% uptick, previous reading upgraded to show 0.9% growth from initially reported 0.5% increase
CHF Pairs
Switzerland’s trade surplus narrowed down from 2.9B CHF to 2.5B CHF in February as exports fell by 1.1% while imports rose by 1.3% for the month.
We also got news that there was a coordinated effort by major central banks (Fed, BOC, BOE, ECB, BOJ, and SNB) to shore up liquidity by increasing the frequency of U.S. dollar swap operations. It’s tough to say but this may have been a calming factor, possibly contributing to bottoming out of the negative risk-off move in Asia on Monday.
Global stock indices even managed to chalk up a decent rebound, as the Hang Seng index recovered by nearly 1% while S&P 500 futures rallied 2.2%, while gold lost some of its luster when the dollar pulled up.
On Monday, UBS announced that it will acquire Credit Suisse for 3B CHF through Swiss government-brokered deal, which includes 9B CHF gov’t guarantee and 10 billion CHF liquidity assistance
Meanwhile, hotter than expected U.K. CPI also took center stage, as the surprise pickup in headline inflation bolstered BOE tightening hopes ahead of their actual statement. The U.K. central bank increased borrowing costs by 4.00% to 4.25%, with policymakers voting 7-2 in favor of a hike and assuring that their banking sector maintains robust capital and strong liquidity.
Canadian median CPI dipped from 5.0% to 4.9% year-over-year vs. 4.8% estimate in February, as grocery prices remained elevated due to supply constraints and bad weather conditions
Canada’s headline CPI dipped from 0.5% to 0.4% month-over-month in February vs. expectations of another 0.5% increase, bringing annual CPI down to 5.2%
Overlay of CHF Pairs: 1-Hour Forex Chart
ECB President Lagarde reinforced the central bank’s hawkish plans, saying that the “rate path is data-dependent,” but stressed that “bringing inflation back to 2% over the medium term is non-negotiable.”
Although the Fed refrained from making any other adjustments to its current policy stance and dot plot forecast, markets took the statement as generally dovish. The dollar index dipped 0.5% after the announcement and presser, dragged further south by Yellen’s clarification that the government is not considering a “blanket” insurance to backstop deposits.
Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour by TradingView
Another big beneficiary of banking contagion jitters was gold, as the precious metal busted through the key $2,000 level, lifting silver and bitcoin a.k.a. “digital gold” along with it.
Chinese Foreign Ministry confirmed that President Xi visited Russia on March 20-22 for a state visit to discuss strategic cooperation
Reuters Tankan survey showed large Japanese manufacturers remaining pessimistic for a third month in a row in March
Yellen reassured that regulators are prepared for further steps to support the banking sector if needed
Euro area current account for January: rose to a €17B surplus vs. €13B surprlus in December
While gold rounded up another day in the red, copper prices refused to back down and instead rallied for the fourth consecutive session to trade around $4 on signs of stronger demand from China.
U.K. headline CPI jumped from 10.1% to 10.4% year-over-year in February vs. estimated dip to 9.9% on higher prices of housing and household services, including electricity and gas
Australia’s MI leading index posted another 0.1% m/m dip in February, chalking up its seventh consecutive negative reading
Flash Eurozone PMI Manufacturing PMI for March: 47.1 vs. 48.5; Services PMI at 55.6 vs. 52.7
Likely contributing to this slight boost in confidence were reassurances from U.K. and EU regulators that losses for Credit Suisse’s junior creditors would be minimized, along with Lagarde’s remarks that price stability tools remain separate from measures supporting financial stability.
U.K. GfK consumer confidence index rose from -38 to -36 vs. estimated -35 figure for March, still a rebound off historic lows as measures for personal financial situation and general economic situation improved
The Bank of Canada’s Summary of Deliberations showed that members were concerned that inflation will be hold above the 2% target and see a potential further need to tighten monetary policy.
RBA policymakers also noted that employment growth has slowed and hiring intentions point to further moderation with job vacancies declining
Risk assets were able to extend their gains the following day, as Treasury Secretary Yellen mentioned that uninsured deposits might be covered if smaller lenders start showing signs of a deposit run as well.
Japanese national core CPI fell from 4.1% to 3.3% year-over-year in February, headline rate fell from 4.3% to 3.3% vs. projected 4.1% reading
Swiss National Bank (SNB) raised its interest rates by 50 bps to 1.5%, doesn’t rule out further rate hikes or currency interventions.
AUD Pairs
Overlay of CAD Pairs: 1-Hour Forex Chart
Australia Weekly Consumer confidence was down .5 to 76.5 from the previous week, the lowest read since April 2020
JPMorgan analysts estimate that some $1 trillion worth of deposits have already left the most vulnerable banks, following the collapse of SVB and Signature Bank two weeks ago
Treasury Secretary Yellen assured that uninsured deposits might be covered if smaller institutions show signs of bank runs, but later clarified that the government is not looking into a “blanket” insurance for deposits
U.K. PPI input prices fell by 0.1% month-over-month in February after earlier 0.4% uptick, PPI output prices tumbled 0.3% vs. estimated 0.1% increase