US Fed, Treasury, FDIC act to contain SVB contagion worries

Good morning

I mentioned SVB had ran into financial difficulties late last week but to be honest hadn’t really considered the wider implication of a bank going under. The fear of contagion and a run on other banks looked like it could have been a real problem, however overnight the US treasury, Fed and FDIC have announced steps to help contain those fears and protect deposits, which has pushed US equity futures into positive territory.

There has been some scaling back of US rate rise expectations for this month. Remember after Powell there were many looking for a 50bps rate rise from the Fed, some are now doubting whether we will have any rate rise at all, Goldmans being one of them. This has helped push GBPUSD up to 1.2140 and EURUSD to 1.0735 overnight, both currently 40 pips or so off those highs. GBPEUR just around 1.1300 as I type.

Meanwhile the UK government is looking at rescue plans to help firms hit by the SVB collapse but so far I haven’t seen any firm details. The support from US and UK governments is good for those with deposits and I’m not saying they shouldn’t do it, but I fear it does set a dangerous precedent, perhaps by instilling a ‘you can never lose’ mindset for both bankers and customers. However if the cost of not doing so was a possible collapse of many more banks, maybe it’s worth it.

Just a quick mention of Fridays US nonfarm payroll release which saw a headline of +311k, far greater than had been expected, but the strong headline was tempered by a higher unemployment rate and lower average earnings.

Spurs managed a win at the weekend by my viewing of the game on Match of the Day was somewhat altered after the Lineker fiasco. I have to admit to being in two minds on this. I am all for free speech so really I should be in full support of Lineker, and I must admit I read his tweet and it really didn’t seem shocking enough to have created all this furore. One of the problems of the media, including and social media, is how easy it is to whip up a frenzy over something that really is just someone’s passing comment.

So who do I blame for this? Lineker? The ‘media’? BBC? The government? Have to say that Linekers fellow presenters who refused to turn up to work must shoulder some of the blame as well. Surely though, it is down to the BBC to decide who to employ, and if their staff are acting in a way they do not approve, they can make the decision to not employ that person. I’m sure there are plenty of others who would relish the chance to present MotD and other sports and no doubt for a lot less money. Lineker may well be good now, but I saw his very first MotD and he was dreadful. Perhaps the time has come for someone else to take over and let Lineker and his gang continue their political or moral agenda unhindered by a regular £1.4m salary.

The problem I have with free speech is that there really isn’t such a thing. Free speech only works if you can voice an opinion, discuss that opinion and respect that others may not share your view regardless of how strongly you may feel. But it is clear that this version of free speech doesn’t exist, the fear of offending a minority or majority group means many keep quiet when they may really want their voiced heard.

A comment made by a sports commentator has taken more of my time this morning than a possible banking crisis. Perhaps I am therefore one of the guilty ‘media’ types that spends far too long wittering on about the unimportant things. I’m clearly part of the problem.

Best I leave it there. A very light calendar today but most interest likely to come when the US markets, and banks, open in a few hours.

- 23.30 AUS Westpac consumer confidence

- 07.00 UK unemployment

Equities wobble on SVBank worries ahead of US employment numbers

Good morning

Headlines seem to be focussed on Silicon Valley Bank after its share price fell some 60% as it announced it is looking to raise more cash. SVB is not a bank I know much about but the funding concerns led to falling equity prices across US and Asia.

Currencies are little changed, although USD did lose some ground yesterday as the post-Powell buying ran out of steam. GBPUSD traded up to 1.1960 and EURUSD just managed to break 1.0600 this morning although both pairs are now a bit lower at 1.1930 and 1.0575 respectively. GBP a little higher against EUR at 1.1280, given a bit of a boost by very slightly better UK GDP numbers out this morning.

BoJ left policy unchanged at Kurodas last meeting which sent USDJPY higher from 135.95 to 136.95, however the lower equities and a bit of a return to safe haven buying helped yen recover part of those losses, the pair now 136.35.

AUD has come under more pressure than some, AUDUSD down at 0.6580, while the yen buying has sent AUDJPY back below 90.00, it had traded as low as 0.8925 before BoJ, did creep back above 90.00 briefly but now sits 89.70. I only mention this as you may recall back on 17th Feb I looked at some downside AUDJPY ideas for a break below 90.00, if it can drift a bit lower I’ll be happy although with just over two months to go it is far too early to be counting profits.

Later today we will have US employment numbers, a headline in the low +200k area is consensus although I have seen a few banks looking for a stronger reading, up in the high 200s. The higher the number, the more support USD is likely to get. After Powell’s comments earlier in the week there is a chance for more volatility than normal over this release.

Elsewhere, Russia continue missile strikes on Ukraine, this time there are reports that they have used hypersonic missiles that are extremely difficult for air defences to shoot down. Putin does seem to be stepping up his offensive, I wonder whether this is ahead of another push on the ground.

Looking to the weekend, the weather seems pretty miserable although we’ve not had any more snow but temperatures remain low. I made the potential mistake of allowing my daughter to have a party this evening. She is a sensible girl but getting 60 or so teenagers together rarely goes without incident. Was rather hoping they’d spend their time outside but with minus temperatures expected they are more likely to remain indoors. Can’t say I’m looking forward to it. Wish me luck!

We have some six nations rugby, with England playing France on Saturday, while Italy may well fancy their chances against Wales. Meanwhile Spurs take on Nottingham Forest, after recent performances I can’t say I’m confident, but anything other than a strong victory is likely to put Conte under even more pressure.

Have a great weekend when it finally comes……..

- 09.00 ECBs Panetta speaks

- 12.00 UK NIESR GDP estimate

- 13.30 US nonfarm payrolls

- 13.30 CAD employment

- 15.00 ECBs Lagarde speaks

- 19.00 US monthly budget statement

USD holds post-Powell gains, but for how long?

Good morning

USD has held onto post-Powell gains with GBPUSD 1.1850, EURUSD 1.0555, leaving GBPEUR 1.1225. Powell spoke again yesterday and initially it sounded as though he may have been back-tracking a bit on his hawkish comments, saying that Fed were not on a set rate path and that no decision on rates has yet been made, but any USD weakness on those comments didn’t last long.

US jobs data in the form of ADP was stronger than expected, we do have nonfarms tomorrow which as we know can potentially have more market impact. We did have the Fed Beige book yesterday evening which didn’t offer anything particularly new but seemed to suggest inflationary pressures were easing in many districts, with some therefore questioning the reason for Powells recent hawkishness. There is still potential for volatility over the size of the next rate rise, not everyone believes we’ll see a 50bps rise in March.

BoC kept rates on hold yesterday as expected. They say they continue to monitor data but aim really to keep rates on hold. As you know I was looking for a possible move lower in USDCAD but instead was disappointed there was not more in the way of hawkish comments, USDCAD drifted above 1.3800 and is holding around that area as I type.

USD is also up against JPY at 136.75, although this is some way off the high early yesterday morning at 137.85. Eyes on the BoJ rate announcement in the early hours of tomorrow morning which will be Kuroda’s last meeting before being replaced by Ueda. Can’t see Kuroda doing anything although there seems to be a worry that a lack of any action could see USDJPY higher, therefore a tweak to their yield curve control banding could be introduced to stem further yen weakness. Even so, unless Ueda makes some policy changes reasonably quickly, there is still room for yen to weaken further.

Russia has launched a huge missile and drone attack on Ukraine, targeting residential areas as well as infrastructure facilities. The Zaporizhzhia nuclear plant had been hit leaving it without an electricity supply other than through generators. Russia seem intent on destroying as much of Ukraine as possible, the chances of an end to the invasion look extremely limited.

I went to watch Spurs play AC Milan yesterday evening, always impressed with the stadium although it would be nice if the football played there matched the building. As one of the pundits said, there is no point having the nicest house if you don’t have the furniture to go with it. Anyway, my ‘seat’ was actually in a standing area, yes there was a chair but the whole bottom area of the South stand is designed for safe standing. First time I have stood at a football stadium for years. I do like my creature comforts but have to say it was an enjoyable way to watch a rather mediocre match.

- 13.30 US initial jobless claims

- 18.30 BoCs Rogers speaks

- 21.30 NZ business PMI

- 23.30 Japan household spending

- 03.00 BoJ rate announcement

- 07.00 UK GDP, industrial production