Here’s what you need to know for next week
Wall Street indexes ended the week on a higher note, but the week was full of ups and downs. During a rough ride, the Nasdaq gained more than 4%. The VIX went up by about 2% over the past week, but it is still 25% higher than it was three months ago. Prices in the financial markets were again driven by worries about the banking system. The week ended with losses for both European and Asian indices.
What the Silicon Valley Bank (SVB) started a week ago was continued by the Signature Bank, Credit Suisse (which keeps an eye out), and the First Republic Bank. The next few days will be dominated by problems on the financial markets.
Even though the market is tense, the Fed is likely to raise interest rates by 25 bps on Wednesday. If the US central bank stays on hold out of fear of the current situation, it could send a shock through the markets that could cancel out the good news that the tightening cycle has stopped. People will pay close attention to the signs of what’s to come. China is likely to keep rates the same on Monday.
The biggest weekly gain for US Treasuries in years came last week. Yields fall all over the world as investors rush to safe investments as the chances of interest rate cuts before the end of the year rise. The currency that did the best in this situation was the Japanese Yen. USD/JPY lost almost 300 pips.
The end of the week for the US Dollar Index (DXY) was the lowest in five weeks. Even though market sentiment got worse, the Greenback did not get a big enough boost. If people start to worry about systemic risks, the DXY could make a strong comeback.
As expected, the European Central Bank (ECB) raised interest rates by 50 basis points and stopped giving guidance about the future. Current events are more important than economic data right now, but next week’s PMIs will get a lot of attention. Next week, there will be a vote of “no confidence” in French President Emmanuel Macron. The banking crisis caused the Euro to lose value. Since the middle of January, this was the lowest close for EUR/GBP. EUR/USD ended the week flat, looking at the area around 1.0700, after staying above the important level of 1.0500.
The Pound got a boost from UK economic data that was better than expected. Since the middle of January, GBP/USD had its best week, going up towards 1.2200. The Monetary Policy Committee of the Bank of England will get together next week. People in the market expect a final rate hike of 25 basis points.
The chaos in the banking system, which included Credit Suisse, hurt the Swiss franc. The Swiss National Bank (SNB) had to do something about it. On Thursday, the SNB will say what its decision is about monetary policy. Switzerland’s inflation in February was higher than expected, which could keep the SNB from raising rates again. Again, USD/CHF went from near 0.9000 to the 20-week Simple Moving Average in a very short amount of time. The EUR/CHF went up from a four-week low of 0.9900.
USD/CAD ended the week lower, near 1.3700, but it was still a long way from its lowest point. The Consumer Price Index (CPI) for February will be the most important economic report for Canada next week. It will come out on Tuesday. Even though New Zealand’s GDP for Q4 was weak, the kiwi was one of the currencies that did the best. The
The AUD/USD had its best week in months, thanks to a weaker US Dollar and good news about jobs in Australia.
Gold is another big winner. It gained more than $100 this week and is now close to $2,000. The fear of taking risks and the change in bond yields are also good for gold.
Bitcoin keeps going up, and after gaining more than 20% in the past week, it is back above $26,500.
Emerging market currencies had a crazy week. For the second week in a row, USD/MXN went up. The pair made up a 10% loss for the year, but it couldn’t stay above 19.00.