Another day, another banking crisis

OzForex Research OzForex Foreign Exchange

Daily currency update

The New Zealand dollar recovery faltered through trade on Wednesday, sinking back below US$0.6200 amid new fears surrounding the health of the global financial system. Markets were plunged back into turmoil after Credit Suisse auditors identified and disclosed “material weaknesses” in the bank’s reporting controls. With stocks plunging, panic intensified following reports the bank’s largest Shareholder (Saudi National Bank) rejected calls to provide capital should funding needs arise. With the bank issuing a public statement of support in a bid to obtain a liquidity backstop and markets in freefall the Swiss National Bank stepped in, announcing it will provide liquidity “if necessary”. Just as confidence was beginning to recover, the shock of last week’s Silicon Valley Bank and Signature Bank collapse has investors again being thrown to the wolves. Bank stocks plunged, leading losses across key equity indices while the risk-off move has forced the NZD toward intraday lows at US$0.6170. With little of note on the day’s domestic ticket, our focus would ordinarily turn to Australian employment data and the European Central Banks’ latest policy update for direction against key major crosses. Instead, attention will likely remain affixed to unfolding developments in this latest banking crisis. We are keenly attuned to any news surrounding Credit Suisse and risks connected with other larger banking institutions with macro themes unlikely to have a significant impact until the dust settles.

Key movers

Currency markets were again thrown into turmoil as fresh concerns surrounding the health of the world financial system forced investors toward safe haven corridors. “Material Weaknesses” identified in Credit Suisse’s reporting controls and public calls for a liquidity backstop forced key equity indices lower and prompted a rush on risk assets, propping up the Japanese Yen and USD. With the focus on European banking woes, the USD was again a source of safe haven bids as the Euro gave up nearly all its latest gains plunging 1.7% and sinking below 1.0550, before finding support. With the USD and JPY buoyed, the GBP slid back below 1.21 and tested a break below 1.2025 before finding buyers. With attention squarely affixed on developments across the global financial system, macro themes will likely take a back seat in governing direction. With risk off we expect the USD and JPY to remain well bid.

Expected ranges

NZD/USD: 0.6120 – 0.6280 ▼
NZD/EUR: 0.5780 – 0.5920 ▲
GBP/NZD: 1.9280 – 1.9620 ▼
NZD/AUD: 0.9250 – 0.9420 ▲
NZD/CAD: 0.8480 – 0.8580 ▼

Author

OzForex Research

OzForex Foreign Exchange

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.