Daily Market Commentary 21st March 2023

A weekend of action, on both sides of the Atlantic, has served to calm markets, following the emergence of the latest banking crises. The Swiss National Bank had earlier offered a CHF50 billion bail-out package for the Credit Suisse Bank and over the weekend they orchestrated the takeover of Credit Suisse by Swiss rival UBS bank. Meanwhile US Banks formed a coalition with the Fed to approve a US$30 billion pool, to support liquidity of US banks. Major central banks are also launching a ‘Joint Liquidity Operation’ , to back-stop all banks, opening a new daily currency swap initiative. The markets reacted strongly to these measures, with equities rising strongly, while the US dollar eased. The EUR rallied back above 1.0700, while he GBP jumped, to trade above 1.2250.

The call to action in Europe and the USA, have calmed markets (at least for today), but the root cause of the problem remains. All eyes are on the banking sector and Central Banks, with the Federal Reserve and the Bank of England scheduled to raise rates, once again his week. There is a huge amount of pressure on these two Central Banks to pause the tightening of monetary policy, but this is unlikely. The softer US Dollar allowed the AUD to rebound back above 0.6700, while the previously strong performance of the NZD slowed, trading just above 0.6200. All eyes remain on the banking sector and Central banks.