Forex Today: Yen gains in rough waters ahead of Fed, SNB, BoE and PMIs

Here is what you need to know for next week

Wall Street indexes ended higher a volatile week as traders sail in rough waters. The Nasdaq gained more than 4%, on a bumpy trip. The VIX moderated, rising around 2% over the week, but is up 25% from the level it had a months ago. Banking concerns again dominated price action across financial markets. European and Asian indices closed with weekly losses. 

What it started a week ago with the Silicon Valley Bank (SVB), continued with Signature Bank, Credit Suisse (that stays on the lookout) and the First Republic Bank. Financial market turbulences will remain centre-stage over the next days. 

Next Wednesday, the Fed will likely raise interest rates by 25 bps, despite market tensions. If the US central stays on hold afraid of the current context, it could trigger a shock in markets that could offset the positive news of a pause of the tightening cycle. The clues about the future will be watched closely. China on Monday is seen leaving rates unchanged. 

US Treasuries had the biggest weekly gains in years. Yields across the globe collapse as investors fly to quality amid rising odds of interest rate cuts before year-end. The Japanese Yen was the main winner among currencies of this context. USD/JPY lost almost 300 pips. 

The US Dollar Index (DXY) posted the lowest weekly close in five weeks. The deterioration in market sentiment did not boost the Greenback enough. If systemic risk fears start to dominate price action the DXY could make a strong comeback. 

The European Central Bank (ECB) raised interest rates by 50 basis points as expected and dropped forward guidance. Economic data is being overshadowed by current developments; however, next week’s PMIs will gather attention. French President Emmanuel Macron will face a non-confidence vote next week. The banking crisis weighed on the Euro. EUR/GBP posted the lowest close since mid-January. EUR/USD ended the week flat looking at the 1.0700 area, after holding above critical 1.0500. 
Better-than-expected economic data from the UK offered support to the Pound. GBP/USD had the best weekly performance since mid-January, rising toward 1.2200. Next week, Bank of England’s Monetary Policy Committee will met. Market participants expect a final 25 basis points rate hike.

The Swiss franc was hit by the banking chaos, that included the Credit Suisse. The situation forced the Swiss National Bank (SNB) to take action. The SNB will announce its monetary policy decision on Thursday. February’s inflation in Switzerland surprised on the upside, but the current turmoil could keep the SNB away from another hike. Again USD/CHF rebounded sharply from near 0.9000, to the 20-week Simple Moving Average. EUR/CHF rose from four-week lows past 0.9900. 

USD/CAD finished the week lower around 1.3700 but far from the bottom. Next week, the key report from the Canadian economy will be February’s Consumer Price Index (CPI) on Tuesday. The kiwi was among the biggest gainers despite weak New Zealand Q4 GDP data. The

AUD/USD had the best week in months, helped by a weaker US Dollar and also by upbeat Australian employment data.

Gold is another major winner rising more than a hundred dollar during the week, approaching $2,000. The yellow metal is also benefiting from risk aversion and the reversal in bond yields. 

Bitcoin keeps moving north and is back above $26,500 after rising more than 20% during the week. 

It was a wild week for emerging market currencies. USD/MXN jumped for the second week in a row. The pair erased a 10% YTD loss but failed to hold above 19.00.