European and US markets settled down a wee bit, following the mayhem caused by the mini-banking crises. Is this the end of the crises and have the Federal Reserve and Treasury acted swiftly enough to provide adequate tools, to prevent further contagion in the banking industry? Time will tell. The bail-out for the SVB and Signature Bank, was swift and effective, while the loan scheme for other banks, to offset losses in bond and security holdings is extremely generous. Is it enough, to prevent further collapses in the Banking sector, and how much will I cost? The crises triggered speculation that the Fed may be forced to pause the interest rate hikes and reverse QT, but this is very unlikely to happen. US inflation data was in-line with expectations, coming in at an annualised 6.0%, but core inflation remains stubbornly high. This will only reinforce the Federal Reserve’s resolve to overcome this existential threat to the economy, that is inflation. The weaker US Bond Yields have undermined the US Dollar, with the EUR trading 1.0730, while the GBP is above 1.2150.
Commodity currencies are beneficiaries of the softer reserve, with the AUD trading above 0.6650, while the NZD holds above 0.6200. Australian Business Confidence crashed into negative territory, while the Consumer Confidence datta, remained flat. NZ markets look ahead to the Q4 GDP growth number, set to be released Thursday, which may hint at a recession? Market attention will turn to US PPI and Retail Sales, set to be released tonight, while US Banking remains the gorilla in the room.