Fed recession warning.
After Friday’s European open, there were fresh concerns surrounding the global banking sector with a particular focus on Europe and Deutsche Bank shares cams under notable pressure.
As banking-sector stresses increased, there was a wider dip in risk appetite with equities under pressure. Weaker risk appetite undermined oil prices and commodity currencies.
The Euro also came under pressure amid the slide in Euro-zone banking stocks with EUR/USD sliding to lows around 1.0715.
After initial selling pressure, there was a recovery on Wall Street later in the session which also helped underpin wider risk appetite, The Euro also recovered with EUR/USD around 1.0750.
Wall Street gains dampened demand for gold and oil prices also recovered.
The US 10-year yield dipped to lows around 3.30% on Friday before a recovery to 3.40% on Monday. Higher US yields sapped defensive yen support.
Over the weekend, Minneapolis Fed President Kashkari stated that a credit crunch in the banking sector could push the economy closer to recession. He added that the Fed was watching the situation.
Over the weekend, Minneapolis Fed President Kashkari stated that a credit crunch in the banking sector could push the economy closer to recession. He added that the Fed was watching the situation very closely, but also stated that it was too early for any forecast surrounding the next policy meeting.
The Euro-Zone manufacturing index retreated to 4-month low of 47.1 for March from 48.5 previously and below expectations of 49.0. In contrast, the services sector strengthened to a 10-month high of 55.6 from 52.7 previously and well above expectations of 52.5.
Manufacturing input prices declined for the first time since July 2020, but there was still substantial upward pressure on output prices.
The UK PMI manufacturing index for March dipped to a 2-month low of 48.0 from 49.3 previously and below consensus forecasts of 50.0. The services-sector index recorded a slight decline also to a 2-month low of 52.8 from 53.5 and marginally below expectations of 53.0.
Overall business confidence strengthened to a 12-month high. Input prices increased at the lowest rate for two years, and although there was still strong upward pressure on output prices, it was the lowest rate of increase since August 2021.
The Euro dipped steadily as financial sector concerns increased again. The dollar gained an element of support on defensive grounds. EUR/USD dipped to lows around 1.0715 before a recovery to just above 1.0750. Narrow ranges prevailed on Monday with EUR/USD around 1.0765.
USD/JPY dipped sharply to lows around 129.65 before a recovery to 130.70 as equities rallied. There was consolidation around 130.75 on Monday as caution prevailed.
The Swiss currency secured support on defensive grounds despite reservations over the banking sector. EUR/CHF dipped to just below the 0.9900 level with USD/CHF settling just below 0.9200. Sterling was hampered by fresh concerns over the banking sector. GBP/USD dipped to lows just below 1.2200 before a recovery to above 1.2200. GBP/USD traded around 1.2235 on Monday.
Commodity currencies were hampered by fresh banking-sector fears but recovered from intra-day lows. AUD/USD dipped to lows around 0.6625 before a recovery to 0.6645 with little change on Monday USD/CAD jumped to highs just above 1.3800 before settling just below 1.3750 and trading around 1.3725 on Monday.
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