JASPER’S MARKET’S SQUAWK 21-03-2023

Risk Appetite Returns on Bank Deals

Despite initially calming the CS-UBS merger markets, investors were not convinced the banking sector is now restored. But news of NYCB acquiring assets from Signature Bank by the US opened saw sentiment turning around.

Chart: GBP/USD

Key Factors for Today

• CS – UBS merger uncertainty shifts with news of NYCB – Signature deal
• Gold pops above $2000/oz for the first time in a year, to later reverse
• WTI puts in impressive recovery after falling to a 15-month Low
• Dow 1% higher on expectations of 25bps Fed hike on Wednesday
• ECB’s Chief said the bank would have indicated more hikes if there had been a banking crisis
• DUP does not seem prepared to back Windsor Framework
• Xi and Putin meet in Russia, but no major announcements yet

Gold Spikes to 1-year High Before Reversing

The early part of Monday’s session was dominated by the Credit Suisse – UBS merger, which didn’t seem to return much confidence in investors, as European indices traded down and gold popped above $2,000/oz for the first time in a year. The metal reversed following news of the NYCB – Signature deal, closing 0.50% lower but with evident uncertainty printed on the charts. $1965/oz remains short-term floor bulls need to hold firmly.

WTI Recovers from 15-month Low

Broader concerns about the banking sector’s health saw WTI drop to a fresh 15-month low yesterday. Prices hit $64.40 before reversing to a plus 1.60% as sentiment shifted. With crude dependent on GDP growth and expectations taking a beating from the banking sector turmoil, GS lowered their forecast for 2023 over the weekend from $100 to $97.

Dow 1% Higher as Fed Seen Hiking by 25bps

Dow Jones rose more than 1% on Monday as most economists seem to agree that the Fed will hike 25bps rates despite concerns over the banking sector. This is half of what the Fed Chair signalled and economists had thought before the banking meltdown. The index fell to an October low before fully reversing above the 32k handle. There is significant resistance at 32500 and decent support under the ground level.

Lagarde Says ECB Would Be More Aggressive

ECB President Christine Lagarde said that the ECB’s post-rate statement would have indicated that more hikes were necessary if it not were for the “tensions” in the banking sector. She also said that wage pressures had strengthened and inflation is projected to remain too high for too long. EUR/USD closed 0.26% higher, recapturing $1.07, with short-term resistance at $1.0733. $1.0687 needs to be defended in the event of weakness.

DUP Will Not Support Windsor Framework

DUP Leader Jeffrey Donaldson said that the adjustment to the Northern Ireland Protocol was not enough, and the party would not return to a power-sharing agreement in Stormont. UK PM spokesman said there were no plans for any substantial change to the Windsor framework. Meanwhile, cable regained control of $1.22 and headed towards $1.23 to mark a 9-week high. $1.2374 is solid resistance ahead unless the pair slides under the $1.22 handle.

Xi Visits Putin in Moscow

China and Russia’s leaders met and talked about friendship and relations between the countries, but no new concrete announcements were made.

On The Docket

• ZEW economic index
• Canadian inflation
• ECB Lagarde speech
• Home sales
• API crude stock change

Fx 1-Day Relative Performance (USD)

• Kiwi and Aussie 0.73% and 0.56%, down
• Swiss franc and pound 0.27% lower
• Loonie and yen 0.22% lower
• Euro 0.12% down
• Gold and silver are unchanged
• Crude and brent 1% lower
• Natural gas is up by 0.55%