Daily Market Commentary 17th March 2023

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The ECB held it’s nerve and raised rates by 50 basis points, as expected. There was huge market pressure on the ECB, to temper the rate rises, in the face of the looming possible banking crises, easing the pressure on interest rates and the banks security holdings. The ECB has steely resolve in their quest, with an eye on inflation, which remains at dangerously elevated levels in the Eurozone. They are still operating at way below the Fed and other western Central Banks, in terms of yields. The run on Credit Suisse came to an end, with news that the Swiss National Bank, would provide up to $54 Billion in liquidity. Meanwhile in the US, a group of 30 banks, are said to be raising up to $30 billion in liquidity support for the embattled First National Bank. Efforts to cauterise the banking sectors haemorrhaging, appear to be succeeding , at least for today?! Actions by the ECB, allowed he EUR to regain 1.0600, while the GBP pushed back above 1.2100.

Commodity currencies were mixed, following the softening reserve, with the AUD consolidating above 0.6600, while the NZD fell back o 0.6140. NZ GDP numbers were bad. Markets were expecting a slight contraction, but the Q4 number contracted by 0.6%, way below expectations. The decline was heavy and across the board, and considering the extreme damage experienced over Q1, NZ is in a real-time recession. The pressure will grow ion the RBNZ to terminate interest rate hikes and ease the pressure on liquidity. The RBNZ will be well aware of the consequences of those actions, as the wild beast of inflation, is far from tamed. Markets will now turn their attention to the EU CPI number to be released tonight and University of Michigan Economic Sentiment report, later in the US markets.

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