Spreadex Market Update
Financial Markets Update: Moody's Downgrades US Banks, Global Markets React
Global equity markets experienced a 'Risk Off' sentiment as China's trade data disappointed and Moody's downgraded 10 US banks, amplifying concerns over the resilience of the banking sector. Amid these developments, the dollar demonstrated strength despite lower yields.
Key Factors for Today
- Moody's downgraded 10 US banks, raising concerns about the banking sector's resilience.
- Germany's CPI aligns with expectations; ECB foresees a decline in inflation.
- API reports a crude inventory build, contrary to projections; EIA maintains demand forecasts.
- New Zealand's inflation expectations slightly below anticipated levels.
- China faces deflation driven by lower food prices and factory-gate prices.
Market Movers
- USD/JPY gained 0.62% to 143.37 following Moody's downgrade, with resistance at 143.90.
- EUR/USD experienced a quick drop to $1.0930 after German CPI release, with resistance near $1.1020.
- WTI held steady at $82.50/bbl despite API's crude inventory build; watch levels at $81.60 and $84.50/bbl.
- The Kiwi declined 0.67% on a stronger dollar, eyeing support at $0.6035 and resistance at $0.6131.
- Gold dipped 0.60% to $1935/ounce amid firmness in the dollar, aiming for $1917 or $1936/ounce.
- Natural gas edged higher by 0.14%, while Crude and Brent declined by 0.28% and 0.24% respectively.
Economic Calendar
- 10-Year Treasury Gilt Auction
- MBA 30-Year Mortgage Rate
- EIA Crude Oil Stocks Change
- 10-Year Note Auction
- RICS House Price Balance
- Japan PPI
- Spain Consumer Confidence
The Big News
Moody's Downgrades 10 US Banks, Dollar Strengthens
Moody's move to downgrade several major US banks sent ripples through the financial world, reigniting concerns about the banking sector's robustness. This downshift compounded existing headwinds, stemming from China's sluggish trade report and the anticipated announcement by the Biden Administration regarding investment restrictions in China. The New York Federal Reserve's quarterly household debt report further strained sentiment, revealing that delinquencies for Q2 remained at an 11-year peak. The report also unveiled a historic milestone, with total credit card balances surpassing $1 trillion for the first time. As a result, USD/JPY surged by 0.62% to reach 143.37, albeit facing a ceiling at 143.90. Support lingers at Tuesday's low, with a crucial handle at 142.00.
Germany's CPI Meets Expectations, ECB Sees Inflation Wane
Germany's July CPI validated projections with a 0.3% monthly growth and an annual rate of 6.2%. In contrast, the European Central Bank's consumer expectations survey projected a dip in inflation over the coming year, falling from 3.9% to 3.4%. The news prompted a swift drop for EUR/USD, momentarily hitting $1.0930 before encountering resistance. The pair's potential upward trajectory depends on its ability to hold above the daily low, with anticipated resistance at $1.1020.
API Reports Crude Inventory Build, WTI Holds Steady
Contrary to expectations, the American Petroleum Institute (API) revealed a substantial crude inventory build of 4.1 million barrels last week. This stark contrast to the projected 0.2 million barrel drawdown raised eyebrows across the energy market. Nonetheless, the Energy Information Administration (EIA) maintained its optimistic outlook on this year's crude demand, forecasting a growth of 1.76 million barrels per day. The EIA also envisaged Brent crude prices averaging $86/bbl during H2 2023. While WTI prices displayed minimal movement, hovering around $82.50/bbl, vigilance is advised at levels of $81.60 and $84.50/bbl.
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