Markets Stabilise Following Weaker US CPI Print as Banking Stocks Stabilise

Following the downside volatility of recent days, global risk appetite was seen improving yesterday. Measures taken by the Fed in the wake of SVB collapsing last week finally look to have helped restore some confidence. Additionally, yesterday’s US CPI data showed that prices cooled in February, further supporting the idea of a smaller Fed hike this month. With traders now expecting less aggressive action from the Fed, equities were seen rebounding as USD trailed off. Attention today turns to US Retail Sales which are also expected to have cooled after the surge seen in January, which should help further support the rebound in equities if confirmed.

Key Factors for Today

- USD weakens as softer Feb CPI points to less hawkish March FOMC
- Equities rebound as banking stocks stabilise – US data on watch today
- EUR leads the recovery in FX amidst a weaker USD
- Metals fall back as risk appetite improves – crude rallies – EIA inventories due today

Coming Up

- USD – US PPI, Retail Sales
- GBP – UK Budget
- USD – Empire Manufacturing

Equities Recover on Weaker US CPI

Equities prices were broadly higher yesterday, led by strength in global banking stocks. A weaker US CPI reading was the main catalyst for the recovery, pointing to a less hawkish March FOMC. Today, a slew of US data (PPI, retail sales, empire manufacturing) will be closely watched with room for the current rebound to extend if we see further cooling across these key indicators.

EUR Rebounds as USD Weakens

A weaker start for the Dollar on Wednesday has fuelled a rebound across FX markets. EUR has emerged as the best performer across the European open today. Traders have been mulling a less hawkish outlook from the ECB on the back of recent market turmoil. However, with US CPI falling back and banking stocks stabilising, conditions are calming a little meaning there might still be room for the ECB to stick to its guns tomorrow.

Metals Fall Back, Crude Stabilises

In the metals and commodities space, gold and silver have fallen back a little owing to the improvement in risk appetite over the last 24 hours. A weaker US CPI reading has all but confirmed a less hawkish meeting from the Fed this month. With risk markets recovering, metals look vulnerable to further downside. Crude prices have stabilised this morning following further heavy selling yesterday which saw futures sinking more than 5%. Today, the EIA is forecast to report a 0.2 million barrel drawdown in crude inventories which should help further support prices if seen.