Markets Report - 27 March 2023

A daily breakdown of the markets for the 27th March 2023, provided to you by Sterlex.

🇪🇺💶ECB policymaker, Pablo Hernandez de Cos, said on Monday, “future monetary policy decisions will depend on three factors, such as new economic and financial data and core inflation.” The headline German IFO Business Climate Index rose to 93.3 in March versus the previous reading of 91.1 and the forecast of 90.9. EUR/USD pair showed no immediate reaction to these figures and was last seen trading at 1.0760, where it was virtually unchanged on a daily basis. Finally, the IFO Expectations Index – indicating firms’ projections for the next six months, improved to 91.2 to in March from the previous month’s 88.4 and against the estimates of 88.0. Meanwhile, the Current Economic Assessment Index edged higher to 95.4 from 93.9 and surpassed the market expectation of 94.1. European Central Bank (ECB) Governing Council Gediminas Šimkus said on Monday, “financial stability is an important factor.” “Bank liquidity and capitalization is high in the euro area,” Šimkus added.

🇬🇧💷The GBP/USD pair builds on Friday's late intraday rebound from sub-1.2200 levels and gains some positive traction on the first day of a new week. Monthly Retail Sales (Feb) data accelerated firmly by 1.2%, higher than the consensus of 0.2% and the former release of 0.9%. UK’s annual Retail Sales data contracted by 3.5% while the street was anticipating a contraction of 4.7%. Bank of England Governor Andrew Bailey is scheduled to deliver a speech at 1700 GMT. This indicates that the rate-hiking spell by the Bank of England (BoE) will stay for a longer period. The pair maintains its bid tone through the early part of the European session and is currently trading around mid-1.2200s, up nearly 0.25% for the day. Pound Sterling remained in action on Friday after robust Retail Sales data.

🇺🇸 🏦Following Friday's rebound, the US Dollar Index fluctuates in a tight channel slightly above 103.00 early Monday and the 10-year US Treasury bond yield clings to modest gains at around 3.4%. This development seems to be helping the risk sentiment improve early Monday. According to the CME Group FedWatch Tool, markets are currently pricing in a nearly 70% chance that the FOMC will keep the policy rate unchanged after the next meeting in early May.

Over the weekend, the FDIC issued a statement announcing First Citizens BancShares Inc bought all the loans and deposits of SVB and gave the Federal Deposit Insurance Corp equity rights in its stock worth as much as $500 million in return, as reported by Reuters. Several Fed policymakers spoke ahead of the weekend but their comments don't seem to be having a significant impact on rate expectations.