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The SVB collapse drove US stock markets to monthly lows. The Nasdaq managed to recover and gained 0.45%, while the Dow Jones lost 0.28% and the S&P 500 fell by 0.15%. The VIX rose 6% after pulling back during the second half of the US trading session.
Crude Oil prices fell more than 2%. WTI finished around $74.50, avoiding a daily close under January or February lows that would have increased the bearish pressure. Bitcoin surged, gaining more than 10%, surpassing $24,000. Gold jumped above $1,900 to the highest since early February, boosted by the rally in the bond market. Silver rocketed by more than 6%, approaching $22.00.
Key Developments
Silicon Valley Bank as well as Signature Bank’s crises unexpectedly but also sharply hit financial markets, creating a confidence crisis that continues to take a broader scope. The Fed announced it will make available additional funding to help assure banks have the ability to meet the needs of all their depositors. US President Biden said that no taxpayer money would be used to bail out banks. The impact has been large enough that a 50-basis point hike from the Federal Reserve at the March 21-22 meeting now seems unlikely.
The US Dollar dropped sharply at the beginning of the week, hit by the decline in US yields as markets consider the possibility of no interest rate hike from the Fed at the March meeting. As a result, US yields suffered the biggest three-day slide in three decades.
USD/JPY fell for the third consecutive day, trimming losses during the American session after recovering above 133.00. EUR/USD broke above 1.0700, hitting the strongest level in a month. Reports suggest the European Central Bank will raise rates by 50 basis points on Thursday despite SVB turmoil. EUR/GBP pulled back to 0.8800. GBP/USD rose sharply from near 1.2050 toward 1.2200.
AUD/USD and NZD/USD took advantage of the weaker Dollar and rose to 0.6700 and 0.6250, respectively. The risk-off environment is not affecting commodity currencies so far. Latin American currencies dropped again, with USD/MXN hitting levels above 19.00.
Economic Data
Tuesday’s CPI reading to be published at 12:30 GMT, has the final word in setting expectations for the Federal Reserve’s looming meeting on March 22. It will be crucial in the truest sense. Market volatility is extreme after the collapse of Silicon Valley Bank (SVB) and concerns about further failures. While the US CPI release is set to add to this volatility, it is essential to take the bank story into account when approaching the release.
The numbers will be watched closely to see how the fight against inflation is going. Prior to the SVB crisis, the US CPI was seen as a critical report for the upcoming Fed’s monetary policy decision. At current hours, markets are seeing a softer Fed, as their focus is on the impact of the banking crisis.
Also Read:
Crypto assets pulling a 180 after Fed’s relief package over banking crisis.
WTI price impacted by US banking fears
EUR/USD advances ahead of US CPI
Upon Signature Bank, SVB collapses, Wall Street divided about the Fed’s next move.
AUD/USD soaring amid catastrophic SVB bank crisis
NY Fed: Year-ahead expected inflation drops to 4.2% in February
