Here is what you need to know on Tuesday, March 14:
The collapse of Silicon Valley Bank (SVB) and Signature Bank hit markets unexpectedly, creating a confidence crisis that continues to spread. The Federal Reserve announced it will make available additional funding to help assure banks have the ability to meet the needs of all their depositors. US President Biden spoke on Monday and said that no taxpayer money would be used to bail out banks. The impact has been large enough that a 50 basis point hike from the Federal Reserve at the March 21-22 meeting now seems unlikely.
The SVB collapse drove US stock markets to monthly lows. The Nasdaq managed to recover and gained 0.45%, while the Dow Jones lost 0.28% and the S&P 500 fell by 0.15%. The VIX rose 6% after pulling back during the second half of the American session.
The US Dollar dropped sharply at the beginning of the week, hit by the decline in US yields as markets consider the possibility of no interest rate hike from the Fed at the March meeting. As a result, US yields suffered the biggest three-day slide in three decades.
On Tuesday, the US Consumer Price Index (CPI) is due at 12:30 GMT (Daylight Saving Time began on Sunday, so the time of main US releases has changed). The numbers will be watched closely to see how the fight against inflation is going. Prior to the SVB crisis, the US CPI was seen as a critical report for the upcoming Fed’s monetary policy decision. At current hours, markets are seeing a softer Fed, as their focus is on the impact of the banking crisis.
USD/JPY fell for the third consecutive day, trimming losses during the American session after recovering above 133.00. EUR/USD broke above 1.0700, hitting the strongest level in a month. Reports suggest the European Central Bank will raise rates by 50 basis points on Thursday despite SVB turmoil. EUR/GBP pulled back to 0.8800. GBP/USD rose sharply from near 1.2050 toward 1.2200.
AUD/USD and NZD/USD took advantage of the weaker Dollar and rose to 0.6700 and 0.6250, respectively. The risk-off environment is not affecting commodity currencies so far. Latin American currencies dropped again, with USD/MXN hitting levels above 19.00.
Crude Oil prices fell more than 2%. WTI finished around $74.50, avoiding a daily close under January or February lows that would have increased the bearish pressure. Bitcoin surged, gaining more than 10%, surpassing $24,000.
Gold jumped above $1,900 to the highest since early February, boosted by the rally in the bond market. Silver rocketed by more than 6%, approaching $22.00.
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