Risk appetite found footing on Thursday after measures to shore up the banking sector were taken. In Europe, the SNB supported Credit Suisse with $54B and, in the US, a consortium of 11 major banks deposited $30B in First Republic Bank to prevent the bank from collapsing on its HTM bond holdings and restrain the fallout.
Stock markets rose across the board, with the more risk-affected Nasdaq rising almost 2.5% as investors rotated from dollar to riskier assets. The DXY closed 0.18% lower and headed to 104.00 early Friday. Separately, the Fed released reserve balance statistics showing $153B borrowed through the discount window (compared to $4.6B last week), an all-time high, as banks look to shore up their balance sheets.
Despite the banking turmoil, the ECB followed through on its telegraphed half-a-point hike, saying it believed the banks in Europe were in a good position and the measures taken by the SNB to help Credit Suisse were sufficient. However, ECB President Christine Lagarde didn’t provide any guidance on future rates, saying that the shared central bank would be data-dependent. EUR/USD closed 0.30% higher to $1.0610, primarily due to dollar weakness, with $1.07 acting as the next resistance.
The relief rally was broad, with cable managing a 0.45% rise ahead of the release of the Consumer Inflation Expectations report. With $1.21 on the rearview mirror, breaking past $1.2150 will expose $1.22 unless the intraday low is lost.
WTI failed to trade above the $70/bbl mark and ranged at $68/bbl, which is near the level the Biden administration had indicated it would start replenishing the Strategic Petroleum Reserves (SPR). White House official and US Energy Envoy Amos Hochstein said the government is committed to replenishing strategic reserves but did not give a timeline on when that would happen.
Weekly EIA Natural Gas inventories had a drawdown of 58B cf compared to 61-63B cf expected, despite colder weather in the country’s northeast. Separately, Repsol said it would not go through with an LNG terminal on the east coast of Canada meant for export to Europe, citing no business case for it. Natural gas closed a mere 1.85% higher to 2.60/cf but remains largely mixed.