Wednesday March 15th, 2023

The US$ strengthens, oil prices gives up early gains, equity markets are down, while US yields rise as focus shifts to EU banking sector. Credit Suisse shares drop to record lows after its primary share holder, Saudi backer rules out further assistance. European banking shares weaken, Dow futures fall 500 points and oil price weaken as investors return to the safe-haven US$. In the US risk sentiment appears to be cautiously normalizing from the SVB-induced panic within the banking sector as focus turns to US regulation and rates. Focus will be on the ECB tomorrow, will the central bank hike 50bps under current market conditions and will the Fed 25bps next week? Today US Retail Sales and the UK Budget Report will dominate the economic docket today.

In other news. Credit Suisse stock price hits a new low after its top shareholder rules out investing more. The ECB is expected to stick to a 50bps rate hike on Thursday despite the banking turmoil. China’s economic activity picked up in the first 2-months of 2023 as consumption & infrastructure investment drover recovery. UK Finance Minister Hunt Spring Budget Report is expected to announce improving financial outlook and 30 billion pounds of additional funds for government spending to boost economic growth. Russian Jet collided with American Drone over Black Sea (FT). Argentina’s inflation rate tops 100% for the first time in three decades. North of Bakhmut, another key battle tests Ukraine’s defenses.

In Currency markets. CNY eases as uneven economic recovery since Beijing dropped its zero-covid strategy. US$ strengthens as a wary calm return to the US banking sector and a head of the US Retail Sales. CNY weakens 0.5%, while Asian currencies are down 0.2% on average vs US$. Trading currencies are volatile with AUD, SEK, CHF & NZD, down 0.5%, ZAR weakens 0.8%, MXN & NOK tumble 1.15% while JPY firms 0.35% vs US$.

Oil prices edge off 3-month lows recouping losses after OPEC upgrades China demand outlook. C$ slips as the US$ remains the primary driver of intraday direction. Domestically CAD Factory sales on Tuesday beat expectations at 4.1% in January vs expected 3.9%, today sees CAD Housing Starts expected to have risen slightly in Feb vs Jan. Expect to see C$ to remain volatile ahead of the Fed decision next week, a smaller US rate hike will help support the C$. Support holds at 1.3670 while resistance remains at 1.3790.

EURCAD eases slightly today but holds close to 2-year highs on expectations that the ECB will hike 50bps at Thursday’s ECB Monetary Policy Decision Statement. Support holds at 1.4600 while resistance remains at 1.4750.

Euro weakens as the US$ rebounds as banking sector concerns ease. Domestically German Wholesale Price Index beat expectations at 8.9%, French inflation rose to 7.3% vs 7.2% in January and European industrial production spiked to 0.9% (y/y Jan) beating expectations 0.2%. Continuing high inflation levels across the EU and strong economic data is anticipated to set the stage for the ECB to hike 50bps at Thursday’s Monetary policy Decision. Today US Retail sales will help drive intraday direction to currency markets. Support holds at 1.0615 while resistance resets to 1.0730.

GBPEUR holds steady ahead of the UK Budget today and the ECB rate decision on Thursday. Support holds at 1.1200 (.8928) while resistance remains at 1.1400 (.8772).

GBP drops below 1.2100 ahead of the UK Budget and US Retail data. Risk tone calms amid easing US banking concerns after the Fed/regulators step up actions. UK Finance Minister Hunt Spring Budget Report is expected to announce improving financial outlook and 30 billion pounds of additional funds for government spending to boost economic growth. Elsewhere Tuesday’s soft UK wage inflation data suggests the BoE will likely hike 25bps at its next meeting. Today the UK Budget & US Retail Sales will be the primary driver of currency market direction today. Support holds at 1.2080 while resistance remains 1.2200.