Market Drivers – US Session – 15/03/2023

Mohamed Abdelhamid 16 March, 2023 2:33 am Forex Market, Market Update

Under the looming shadow of the fears related to the banking industry, central banks are now in a more challenging position. Oil prices plunged more than $5 trading around $68.444 per barrel to their lowest in more than a year, meanwhile gold prices renewed their recent rally as investors sought safe havens, trading above $1919.75 per ounce at the time of writing.

Key Developments

With emphasis on the state of Credit Suisse, the banking crisis spread to Europe (CS). With the help of the risk-off scenario, the DXY increased by more than 1%, wiping out weekly losses. The currencies of emerging markets were under pressure.

Due to the Credit Suisse’s plunge, the Swiss Franc had one of the worst performances. Even in comparison to the euro, it slipped. If necessary, the Swiss National Bank (SNB) promised to give CS liquidity. Although EUR/CHF recovered from 0.9710 to 0.9850, USD/CHF increased from approximately 0.9100 above 0.9300.

The EUR/USD pair experienced its worst day in months as it fell towards 1.0500 before cutting losses. The European Central Bank (ECB) meets on Thursday and will make the eagerly anticipated interest rate decision. Notwithstanding the high inflation, a 50-bps increase is still predicted, but the current unrest leaves all possibilities open.

The GBP/USD exchange rate dropped to 1.2000 as a result of the strong dollar. The GBP/EUR exchange rate did, however, hold very well, falling to a three-month low of 0.8715 before rising to 0.8770.

Prior to falling back, USD/CAD rose sharply, crossing over 1.3800. A minor loss of 0.6200 NZD/USD was recorded. On Thursday, New Zealand will release its Q4 GDP data. Even though it rose back over 0.6600 in the afternoon in America, the AUD/USD gave up recent gains and is now staring at the January lows (0.6580). The employment statistics for Australia will be released in February.

On the back of lower US yields, gold soared to a one-month high of $1,937/oz before giving back gains. After rising above $22.00 on a monthly basis, silver began to decline and finished level at around $21.70.

Despite all the commotion, the price of bitcoin maintained steady at roughly $24,000 after reaching a high of $26,550 on Tuesday, the highest amount since June 2022. To $1,630, Ethereum fell 5%. After a chaotic afternoon that had some panicky moments, Wall Street indexes finished well above their lows. The Dow Jones lost 0.80% while the Nasdaq only managed to gain 0.05%. Government bonds are rising as expectations of central bank tightening continue to decline.

Economic Data

Stats New Zealand released the further quarter Gross Domestic Product. New Zealand GDP SA (QoQ) Q4: -0.6% (est -0.2%; prev 2.0%).
New Zealand’s dollar is getting smacked after softer local GDP data. NZ GDP was 2.2% y/y in Q4 vs 3.3% seen and down from 6.4% prior. Odds of an RBNZ rate hike in April have been fading since Wednesday, a 25bps move is now about 50% priced in.

Earlier on Wednesday, on the economic data front, Retail Sales retreated 0.4% MoM vs. estimates of 0.3% contraction. Even though it’s a negative print, January’s 3.2% jump and February’s data still show that Americans are spending at a slower pace.

At the same time, the US Bureau of Labor Statistics revealed that prices paid by producers in February, also known as the Producer Price Index (PPI), dropped 0.1% MoM, beneath forecasts of 0.3% expansion. Core PPI was 0%, below estimates for a 0.4% increase, showing signs that prices are heading downwards amidst the Fed’s aggressive tightening cycle of 20220.

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NZD/USD nosedives on big miss in New Zealand’s GDP