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Thursday, March 16, 2023

The news shaping the markets today

Canada’s Defence Minister Anita Anand announced plans to send further military assistance to Ukraine. The safe-haven US dollar index fell this morning.


China’s average new home prices fell by 1.2% year-over-year in February, slowing from a 1.5% decline in the prior month, which lent some support to the CNY/USD forex pair.


Australia’s unemployment rate fell to 3.5% in February, from an eight-month high of 3.7% in January. The news sent the AUD/USD pair higher in forex trading this morning.


Japan’s core machinery orders surged 9.5% in January, topping market estimates of 1.8% growth, which lent support to the JPY/USD forex pair.


New Zealand’s economy shrank by 0.6% during the three months to December 2022, compared to 1.7% growth in the prior quarter. The news sent the NZD/USD pair lower in forex trading this morning.

 

What’s happening: The GBP/USD forex pair recorded losses on Wednesday.

What happened: Traders remained concerned around the position of Europe’s banking system after the collapse of Silicon Valley Bank in the US.

Although the sterling fell against the US dollar, it rose against another major currency.

Why it matters: Shares of Credit Suisse tumbled more than 24% on Wednesday, after its biggest investor, Saudi Arabia’s Saudi National Bank, said it could not provide further financial assistance as regulatory guidelines do not allow to go above 10% ownership.

The sharp decline in the Swiss lender’s stock triggered a downturn in the European banking index, which increased demand for safe-haven assets, including the US dollar. Traders shorted high-beta currencies, including the sterling.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 1% to 104.65 on Wednesday.

Traders also monitored UK’s budget, with Jeremy Hunt pledging to halve inflation and lower debt. The Chancellor added that the country would not enter a technical recession in 2023.

On Tuesday, the UK Office for National Statistics reported that annual growth in average total pay, including bonuses, eased to 5.7% in January, from 6% in the prior month.

The GBP/USD forex pair fell around 0.8% to 1.2057 on Wednesday, after hitting a one-month high of 1.2203 in the previous session. However, the sterling gained against the euro. The EUR/GBP lost around 0.6% to reach 87.75, after tumbling to 87.19 earlier in the session, its weakest since December 20, 2022.

London equities delivered their worst daily performance since March 2020. The FTSE 100 fell 3.83% to close at 7,344.4 on Wednesday.

What to watch: Traders will now focus on Bank of England’s upcoming interest rate decision. The central bank is widely expected to keep rates unchanged at its March policy meeting.

The markets today

European stocks will be in focus today ahead of the European Central Bank’s policy meeting

Context: Markets in Europe came under pressure on Wednesday amid concerns around the banking sector.

Details: The pan STOXX Europe 600 Index fell 2.92% to settle at 436.45 on Wednesday, with all sectors closing in the negative zone.

Banking stocks tumbled around 7%, their worst session since Russia announced the invasion of Ukraine on February 24, 2022.

Shares of Credit Suisse Group AG fell to the bottom of the index after the bank’s biggest lender said it would not be able to offer further financial help to the bank. The decline in Credit Suisse’s stock caused a wider selloff in banking stocks, following a modest rebound on Tuesday. Global equity markets have remained volatile after the failure of US-based Silicon Valley Bank.

Other sectors, including oil and gas, also declined by around 6.7%, while mining stocks lost about 5.6% on Wednesday.

Investors also assessed the recent economic data, which showed industrial production in the Eurozone expanding by 0.7% in January, compared to a 1.3% decline a month ago. France’s annual inflation rate accelerated to 6.3% in February, from 6% in January, while wholesale price inflation in Germany eased to 8.9% in February, from 10.6% in January.

The German DAX 40 fell 3.27% to more than a two-month low, with shares of Deutsche Bank and Commerzbank recording losses on Wednesday. France’s CAC 40 index declined by 3.58% to settle at a two-month low of 6,885.71.

What are expectations: Investors await the European Central Bank’s interest rate decision today. Analysts widely expect the central bank to raise rates by 50bps to 3.5% at the meeting.

Other Markets: US trading indices closed mixed on Wednesday, with the Dow Jones index and S&P 500 down by 0.87% and 0.70%, respectively, and the Nasdaq 100 up by 0.42%.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 132.74 and 132.96 Positive
USD/CAD – 1.3752 and 1.3759 Negative
Gold – 1915.10 and 1917.55 Positive
CAC 40  – 6846.76 and 6907.28 Positive
Nikkei 225  – 26905.16 and 26946.16 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0598, 0.19%) Dow ($32,187, 0.29%) Brent ($74.15, 0.6%)
GBP/USD (1.2072, 0.12%) S&P500 ($3,939, 0.36%) WTI ($67.99, 0.6%)
USD/JPY (132.78, -0.48%) Nasdaq ($12,434, 0.46%) Gold ($1,916, -0.8%)

What else to watch today

Indonesia’s loan growth and Bank of Indonesia’s interest rate decision, Italy’s consumer price inflation, Spain’s balance of trade, South Africa’s value of recorded building plans passed, Turkey’s gross foreign exchange reserves, Canada’s wholesale sales, as well as US building permits, housing starts, Philadelphia Fed manufacturing index, export prices, import prices, initial jobless claims, continuing jobless claims and EIA’s natural gas stocks change.


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