Thursday March 16th, 2023

The US$ is steady, oil prices improve, equity markets are up while US yields are mixed as market mood improves. Currency & commodity markets stabilize, gold near 6-week highs, equity markets are up, Credit Suisse shares post a record rebound after the Swiss National Bank throws a $54bln lifeline to Credit Suisse in a rush to ward off a global banking crisis. The ECB faces a rate dilemma today amid the banking turmoil of recent days, nevertheless economists see a 50% chance that the ECB will still hike a half percent today. EBC President will almost certainly try to reassure investors about the health of EU Banks, arguing that they are better capitalized, more profitable and more liquid . Today alongside the ECB Monetary Policy Decision markets will also be monitoring US Building Permits, Housing Starts, Initial Jobless claims and the Philadelphia Fed Manufacturing survey for intraday direction.

In other news. The IMF poised to announce $15.6bn lending program for Ukraine. French protesters pour into streets ahead of parliament vote on pension overhaul. South Korea president Yoon arrives in Japan for rate summit talks. The UK economy likely to avoid recession according to think tank. Poland breaks up spy network, says defense minister. FDIC returned $40bln in US Treasury funds, reversing withdrawal after SVB takeover. Taiwan warns Honduras against ‘poison’ of taking aid from China. Canada’s Couche-Tard in talks on $3bln TotalEnergies stores deal. Iran agrees to stop arming Houthis in Yemen as part of pact with Saudi Arabia.

In Currency markets. Euro & CHF recover a touch as market mood improves post the Swiss National Bank action and ahead of the ECB rate decision. Russian Rouble weakens towards 11-month lows vs US$. CNY improves on signs of property sector improvements. CNY up 0.15%, Asian currencies are up 0.25% on average vs US$. Trading currencies are mixed with NZD & MXN are down 0.3%, while NOK & ZAR up 0.1%, SEK higher 0.3%, AUD & JPY firm 0.4%, CHF strengthens 0.6% vs US$.

Oil prices after hitting a 15-month low regains some ground after the Swiss central bank hands Credit Suisse a financial lifeline. C$ is sidelined unable to benefit for an improving risk mood as diverging interest rates between the BoC vs the ECB & Fed is anticipated to keep loonie on the backfoot. Alongside US economic data, CAD Wholesale Sales which is expected to improve to 3% in Jan m/m vs -0.8% in Dec. Support holds at 1.3670 while resistance remains at 1.3790.

EURCAD gains heading into an expected ½% interest rate hike by the ECB today. Support resets to 1.4535 while resistance adjusts to 1.4700.

Euro bounces off 1.0500 on the Swiss central bank action and with the EBC rate decision today. Euro retest’s 1.0600 amid a positive shift in risk sentiment as fears ease for Credit Suisse after the Swiss central bank $54bln financial lifeline. All eyes shift to today’s interest rate decision today where the European Central Bank is expected to continue its strategy and hike rates by 50bps. If the central bank deviates from the 50bps raise or changes its message, we could further market volatility. Support holds at 1.0550 while resistance resets to 1.0700.

GBPEUR weakens ahead of expectations that the ECB will maintain its hawkish tone and raise interest rates by 0.5% today. Support holds at 1.1200 (.8928) while resistance remains at 1.1400 (.8772).

GBP slips in early trading as investors favours Euro ahead of the ECB rate decision. The National Institute of Economic & Social Research said the UK economy will grow marginally despite high prices hitting household budgets. The forecast comes ahead of official figures showing how well the economy is doing, which are due on Friday. Chancellor Hunt after his budget said the Tax burden will be higher for a while. We remain bearish on the pound as it continues to underperform its EU neighbour. Support resets to 1.1980 while resistance lowers to 1.2125.