Message arising out of the last two weeks is that there is little chance of widespread systemic banking crisis, but badly run banks can still fail.
SVB and other banking stresses are symptoms of tightening liquidity, not the source itself. The real-side effects now ripple into the financial system, while the money market dislocations during the GFC and Pandemic rippled into the real economy. Underlying assets causing a softening of balance sheet dynamics have little to no credit risk.
Financial stress is a sign of the times rather than a harbinger of things to come. As such its business as usual for Central banks. Yields are higher as the expectations (for tomorrow 25 bp hike) gather momentum.
Fed will release their latest dot plot. The last estimate had the Fed terminal rate at 5.11% (5.0% to 5.25%). The expectations last week were for that to go up toward 5.75%, but markets now expect 5% to 5.25%. After Fed, the markets would revert back to 5.75 %
ECB's Holzmann: What we are concerned with is fighting inflation. German PPI rose 15.8% y/y. CS bailout looks to have stemmed banking contagion in Europe.
Resistance at Mar 15 high at 1.0760 and 50% of 1.1034/1.0516 at 1.0775 and as they hold expect a move towards 21dma at 1.0630
South Korean export data has slumped 23% y/y (first 20 days of March) - a sign that global growth has almost turned negative in this month. Finally, the dust has settled on China’s “two sessions” - one of the most important events on Beijing’s political calendar. 6.8800 to support 7.00
UK has skirted banking concerns so far - GBPUSD rose for the 3rd consecutive day- respected the stop 1.2209 briefly and broke through (on account of GBPCHF which was the biggest mover). Bank of England most likely to stay unchanged. 1 2155 break to eventually pave way for 1.1850
In a biggest development, Japan PM visits Ukraine in first war zone trip by head of government since WWII. USD/JPY´s M-formation was pulling in the price to the neckline support. 131.20 to support for 132.65.
USDINR got supported at 82.45 yesterday Ahead of the intervening holiday FOMC , 82.55-82.75.