- Wall Street to the rescue
- ECB conducts 0.50% hike
- Safe havens weaken
- The calm in the markets continued with equities climbing higher after reports that JPMorgan, BofA, Citibank, Wells Fargo, Goldman Sachs, and Morgan Stanley deposited US$30bn with First Republic Bank, another regional bank that has been under pressure recently. The safe havens of USD and JPY were sold as a result.
- The ECB decided to hike by 0.50%, a bold move considering rate markets have been easing rate hike expectations over the last week. The ECB excluded any forward guidance, so it seems it will be data dependent going forward. Moves on the EUR were muted. However the ECB hike did lead to markets now price in a 0.25% hike by the Fed next week, and yields on US treasuries picked up.
* Daily move - against G10 rates at 5:00pm, 16.03.23
** Indicative rates - interbank rates at 5:00pm, 16.03.23
The lure of the USD being a safe haven again is building, judging by moves in the market of late. It seems for the time being markets will take cues from any developments in the banking sector, rather than rate differentials given the interest rate market has turned after dovish rate expectations from central banks across the world.
Looks to be a quiet day today with very few data points to look out for. Markets are continuing their risk-on mood, which should continue to weaken USD going into the weekend.
Chart of the day
As banking stocks recovered yesterday afternoon following the co-ordinated efforts amongst Wall Street banks to prop up First Republic Bank, we see both GBPUSD and GBPJPY recover as risk sentiment improved.
We expect to see continued weakness on USD and JPY pairs, should the risk-on mood continue in markets.
Source: Bloomberg Finance L.P.
Have a great day.