Volatility Sweeps Across Markets As SVB Fallout Continues – US CPI Due Today

It was a volatile day across financial markets yesterday as the SVB fallout continued to cause widespread impact. Bond yields were seen tumbling, with USD heading sharply lower, as traders moved to price in a smaller Fed rate hike this month. Equities saw plenty of whipsaw as banking stocks plunged across the board on contagion fears. Meanwhile risk assets were dragged lower throughout the day while safe-haven assets climbed amidst a broad flight-to-safety. Today, attention turns to the US CPI. With prices projected to have cooled again last month, the data should further confirm the likelihood of a smaller Fed hike this month keeping USD pressured near-term.

Key Factors for Today

- US CPI the key data focus today – lower prices should confirm smaller Fed hike
- SVB fallout continues – equities under pressure as banking stocks crumble across the globe
- GBP higher on better labour data – EUR falls as traders reprice ECB outlook
- Metals sharply higher on safe-haven demand – crude falls on risk aversion

Coming Up

- USD – US CPI
- USD – Fed’s Bowman Speaks
- JPY – BOJ Meeting Minutes

Equities Rebound on SVB-Intervention News

Equities prices have come back under heavy selling pressure for the most part as the fallout from the SVB collapse continues to drive uncertainty in markets. Notably, the losses in US indices have not been the heaviest with markets elsewhere seeing worse declines. The Nikkei and the FTSE are now down around 6% and 7% respectively from recent highs while the DAX was seen suffering its largest one-day loss (-3.3%) yesterday since June 2022.

GBP Rallies on Better Jobs Data

GBP has emerged as one of the strongest performers during the current period of USD weakness. Data out of the UK today showed that the unemployment rate fell to 3.7% in the three months to January, down from 3.8% prior. Wage growth was seen slowing also, falling to 5.7% from 6% prior, taking some pressure off the inflation outlook.

EUR Falls as ECB Outlook Shifts

EUR remains under heavy pressure today as traders re-price ECB rate hike odds for Thursday on the back of the SVB crisis and subsequent fallout. While the bank is still expected to push ahead with its planned 50bps hike, the outlook is expected to be far less hawkish now given recent events with risks that the bank opts for a smaller hike this time around also.

Metals Sharply Higher – Crude Under Pressure

In the metals and commodities space, gold and silver have both been sharply higher amidst the current route in stock markets and repricing of Fed rate hike expectations. Gold and silver are up now around 6% and 10% respectively from last week’s lows and look poised for further gains should today’s inflation data confirm a drop in prices last month. Crude prices remain under pressure today as risk aversion continues to keep prices down. Futures are sitting on last month’s lows currently and look vulnerable to a break lower here.