March 30, 2023

“The EURUSD pair is range-bound after Spain’s data revealed a decline in annual HICP to 3.1% in March from 6% in February. Investors anticipate increased volatility later in the day as choppy market conditions persist. Economic data such as business and consumer sentiment in the Eurozone, March inflation data from Germany, and Q4 US GDP will be released, while investors also watch for comments from Federal Reserve officials.”

Tim Hallinan – Trading Director

Main Headlines

The San Francisco Federal Reserve took over day-to-day supervision of Silicon Valley Bank in the second half of 2021 after its assets crossed the $100 billion mark, triggering more intense oversight. Internal reports showed supervisors calling out problems at the bank soon after the takeover, but none were made public until after the bank’s failure on March 10, 2023. Fed Vice Chair of Supervision Michael Barr has promised full disclosure as part of his supervisory review due out on May 1.

The British finance ministry has proposed measures to regulate raters of environmental, social, and governance aspects of companies, in an update to its Green Finance Strategy. The ministry aims to stamp out “green-washing” in financial markets and ensure market participants have the information and tools needed to align with the country’s climate and nature goals. A consultation paper was published on the plans to meet the target of becoming the world’s first net-zero aligned financial centre.

GBP

Sterling is well bid against most major currencies overnight. The British pound rose to its highest level against the dollar in eight weeks, as concerns about the health of the global financial system eased. The pound’s risk-sensitive nature was boosted by a “rebound in risk appetite amidst cooling concerns about the banking sector turmoil,” according to George Vessey, an FX and macro strategist at Convera. Joe Tuckey, head of FX analysis at Argentex, noted that “Sterling is quite sensitive to risk-on, risk-off moves.”

EUR

Euro is stronger against the dollar and weaker against Sterling this morning. The European Union negotiators have agreed on higher renewable energy targets, a critical element of the bloc’s plans to fight climate change and end dependence on Russian fossil fuels. By 2030, the 27-country EU will commit to sourcing 42.5% of its energy from renewable sources like wind and solar, with a potential top-up to 45%. The current 2030 target for renewable energy share is 32%. The EU got 22% of its energy from renewable sources in 2021, with significant variation between countries.

USD

The dollar is weaker than most major currencies in the early morning trade. The US dollar gained momentum this morning as concerns over the banking sector eased, with investors turning their attention to the Federal Reserve’s battle against inflation. Banking stocks suffered in the past few weeks due to the collapse of two US lenders and the rescue of Credit Suisse, leading to fears that the Fed may have to pause rate hikes. However, no further signs of cracks in the financial sector and steps taken by regulators have calmed investor nerves. Focus has shifted back to what the Fed may do at its next meeting in May.

Markets

The pan-European Stoxx 600 index continued its upward trend this morning, rising 0.84% in mid-morning trade as concerns over the banking sector ease. Almost all sectors were performing well, with retail stocks leading the way, up 2.9%, thanks in part to H&M’s surprise first-quarter profit report. US Stock futures were also in the green, with Dow Jones Industrial Average futures up 120 points, or 0.36%, while S&P 500 futures and Nasdaq-100 futures were up 0.37% and 0.27%, respectively.

Main Economic Data/Central Banks/Government (All Times CET)

10:00 a.m.: Italy Feb. Unemployment
11:00 a.m.: Euro-Area March Economic Confidence
2:00 p.m.: Germany March CPI
2:30 p.m.: US 4Q GDP and weekly Jobless Claims
7:00 p.m.: Fed’s Kashkari speaks

Corporate Events

Earnings include H&M, Manchester United

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.