News & Analysis

US stocks rally as banking sector fears ease, USD and Gold down, Yields up

21 March 2023 By Lachlan Meakin


US markets rose modestly in Mondays session on a more positive tone in the banking sector following on from the UBS – Swiss government bail out of Credit Suisse over the weekend and hopes US banking regulators would backstop deposits to restore confidence in US mid-sized banks.

We saw green across all major indexes, the NASDQ being the lagged as bond yields rose to catch up with Fed expectations especially on the short end, which is a negative for tech and growth stocks which typically hold more debt and are more sensitive to interest rate risk.

In FX the USD was weaker as the markets turned risk on for the session, the Euro was supported by efforts to limit the contagion of Credit Suisse, with ECB President Lagarde noted the exposure to EZ banks is in the millions, not billions, which was seen as Euro positive, this saw EURUSD above 1.07 and testing it’s March highs.

Cyclical currencies found tailwinds from the weaker dollar and upside in US equities with the exception of the NZD. The kiwi seemed to be hit by AUD/NZD flows which saw that pair rally above 1.0750 as the Aussie greatly outperformed on the improved risk sentiment.

Gold briefly got above 2000 USD an ounce early in the session which was a 12 month high but as risk sentiment improved it retraced to finish the session in the red.

Oil also turned around mid session, after getting as low as 64& a barrel, rallying strongly into the end to a 67 handle.

In upcoming economic news Later today is Canadian CPI where inflation is expected to show a moderation, any CAD traders out there should be keeping an eye on this one. For AUD traders the RBA will be releasing their March meeting minutes, with the market now pricing in a possibility of a rate cut at the April meeting, these minutes will take on a special importance.

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