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The U.S. dollar managed to recover from its brief retracement on Tuesday and traded on Wednesday significantly stronger against most other major and emerging market currencies. The USD/MXN rate returned to levels above 19.0 and the USD/TRY rate also reached levels above 19.0 moving towards a new all-time high.
After a highly bullish start into the new week, crypto markets continued to retrace at a moderate pace with Bitcoin trading now in the $24k range and Ethereum remaining above $1,650. The total estimated crypto market cap remained well above $1.1 trillion. While Bitcoin and Binance Coin retain still double-digit percentage growth rates on a weekly basis, some altcoins like Dogecoin and Shiba Inu Coin area actually trading lower on a weekly basis.
While U.S. stock markets managed to recover most of the intraday losses from the early session on Wednesday, markets in other regions were still under pressure. European stock markets like the Europe 50 and even the Swiss 20 after the SNB pledged to prop up ailing Credit Suisse, were still in the red. A steep decline in market valuations over the course of this week was also evident in some Asian markets like the Japan 225 Yen, while the Hong Kong 50 reached a new year-to-date low.
On Thursday Italy publishes consumer price index (CPI) statistics. From the U.S. as usual weekly jobless claims numbers can be expected as well as February data on housing starts and permits.
The sizable amount of volatility in the market also affected currency markets with the EUR/USD pair subject to rarely seen intraday volatility as it moved from a daily high above 1.075 at times towards the lower 1.05-levels only to stabilise later on around 1.06.
Not only the dollar strength affected this move but also the overall position of the common European currency as rates like the EUR/JPY and EUR/GBP were also moving to the downside.
A key event on Thursday will be the monetary policy decision of the European Central Bank (ECB). While most surveyed economists still expect another 50 bp hike, the increasing concerns about the state of the global economy and essentially bailouts extended to banks like SVB and Credit Suisse might limit the ability of central banks to hike rates much further. Market participants will be eagerly awaiting the statements from policy makes on what to expect in the following months from them. Already, shorter term yields like for example of a two year tenor significantly declined since the beginning of this month. U.S. federal government bonds yields were down by more than 100 bp, while German bonds also appreciated with the yield down by around 70 bp over the same period to levels around 2.5% just as the ECB is expected to hike rates to 3.5%, which would mean that the market does not expect that such high rates will remain for long.
Gold prices reached a new six-weeks high despite the dollar actually recovering from its weakness on Wednesday. On the other hand some investors might see the current support measures extended to banks in order to avoid deposit holders to suffer losses as a sign that the overall economy is in turmoil considering safe haven investments. U.S. government bonds like the 10-year U.S. T-Note benchmark yield indeed after a brief reversal came further down on Wednesday, trading again around the 3.5%-level. This in turn might be seen as a somewhat bullish signal for gold investors. As was evident over the past 15 years, governments’ readiness to step in a and attempt to save the day during such crisis makes predictions about actual market price development increasingly tough and as we saw even on Monday after the FDIC bailout of SVB deposit holders, bad news can become good news again very quickly.
Silver prices remained meanwhile almost unchanged after some intraday volatility, while other precious metals like platinum and palladium, which are in demand in different industries even declined in value.
Oil prices continue to drop at a very rapid pace, with a barrel of WTI crude oil at times traded below $66, which makes it the lowest market price since 2021, well before the war in Ukraine and subsequent severe sanctions even started to kick in.
Weekly data published by the Energy Information Administration (EIA) was roughly in line with statistics seen at the American Petroleum Institute (API) one day earlier with a moderate build in oil stockpiles by 1.6 million barrels, while gasoline and distillate inventories were down – according to EIA data by 2.1 million barrels and 2.5 million barrels respectively.
Factors that could have affected prices might have been the overall deteriorating economic growth expectations following troubles at different banks over the past week and the still significantly inverted yield curve pointing towards a high risk of a recession. While the developments surrounding the war in Ukraine are far from certain, there might be at least a sliver of hope that the visit of the Chinese leader to Russia possibly in the next week might broker some sort of a peace negotiation after China recently was credited with bringing arch enemies Saudi Arabia and Iran together to consider reinstating diplomatic ties.
After an initial slump in equity markets in the morning hours on Wednesday, indices like the US 500 steadily recovered and were trading in the night hours on Thursday at a new high for this week well above the 3,900-threhsold.
During the regular session many sectors were still under pressure with banks (US Banks ETF -2.08%) giving up the gains from the previous session, while some of the weakest performers were found in the energy sector (US Energy ETF -5.54%). With this in mind oil companies like Halliburton (-9.04%), Schlumberger (-8.45%), Exxon Mobil (-5.24%) and others significantly underperformed compared to the market which overall by the end of the trading session at least recovered a portion of the intraday losses.
Adobe, the company probably best-known for the PDF format and its suite of graphics and video editing software was trading up by more than five per cent during the extended trading session. Its quarterly results the company confirmed that the company is still growing with revenue up by nine per cent compared to the previous year and after $4.66 billion revenue in the fiscal first quarter the company made a guidance of $4.75 billion to $4.78 billion which was well in line with investors’ expectations.
On Thursday earnings from Dollar General, Hello Group and FedEx can be expected.
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