Morning wrap (21.03.2023)

• Good Morning. Yesterday's trading on Wall Street and in Europe ended higher, making up for losses from earlier in the day initiated by the uncertainty surrounding the takeover of Credit Suisse by UBS. Better sentiment fueled Asian markets today. Stock exchanges in Japan are closed due to a national holiday.

• The AUD/USD pair breaks back below the 0.6700 level. The case for a pause in the rate hike cycle by the RBA at its 4 April meeting has strengthened. According to the RBA minutes released today, the Board agreed to reconsider the case for pausing rate hikes and to closely examine incoming data from the economy.

• The ECB's Holzmann is softening his previous calls for three consecutive 50 basis point rate hikes.

• From the US, there was some news affecting the stock market. The US Treasury is looking at unlimited deposit guarantees (via the FDIC) if the banking crisis worsens.

• On the political front, investors are looking at the Putin-Xi meeting in Moscow, which may bring new threads in the realm of the Ukraine conflict and other geopolitical-economic relations.

• PIMCO lost $340 million on the redemption of Credit Suisse Bank's AT1 bond. Lawyers from Switzerland, the United States and the United Kingdom are talking to Credit Suisse's AT1 bondholders about possible legal action after up to $17 billion in losses related to the redemption.

• Goldman Sachs commented on the current state of the equity market this way - "valuations don't look particularly attractive".

• Bill Ackman, founder and hedge fund manager of Pershing Square Capital commented that the FOMC should consider holding off on rate hikes for tomorrow's Committee decision. Today marks the start of the Fed's two-day meeting in Washington.  

• Citi predicts a 25bp rate hike on Wednesday, and notes that the tone of the press conference will now be particularly important.

• Citadel and Trafigura traders believe that the turmoil in the banking market is temporary and unlikely to cause far-reaching perturbations in the global economy. Demand for oil should strengthen. 

Quotations:

Futures in Europe point to a bullish opening to the session on the Old Continent. US contracts are also gaining, however the scale of the increases is minimal. On the FX market, the USD is currently performing best. NZD and AUD are the worst performers. Energy commodities are down, extending the wave of uncertainty in the economy. Gold and silver are correcting recent gains and recording slight declines. Bitcoin is currently losing 0.4 per cent and slipping towards $27,800.

The AUDUSD pair is currently trading in a structure bounded by important support and resistance levels. The upcoming FOMC decision and ongoing banking uncertainty could create additional volatility on the pair. Source: xStation 5