Good morning and welcome to episode 807 of ‘Talking Bull’. Here are the latest headlines today, Banking sector triggers further volatility, ECB: Inflation concerns trump banking fears, US jobless claims decline, Weak Philly Fed index, Fed expectations stabilise & Dollar loses some ground.
We take a technical look at key markets that are likely to be impacted by today’s events. Also, we participate in a ‘Gun to the head’ challenge where each of us calls a live trade. These will expire at 9pm tonight and we will keep track of the progress over time.
We hope you enjoy it!
For a selection of free educational content, join our Discord server at – https://discord.gg/Db4UWVFvF6
Joe was onside 0.12R on EURUSD. Steve was stopped on EURJPY.
We have included an illustration based on a £1000 account. This will follow the combined return of our morning trades by risking 1% of the trading capital per trade. The 1% risk is a variable monetary amount and will rise and fall based on the success of the calls.
We are currently up 212.18% collectively since we began recording Talking Bull on the 30th October 2019.
Banking sector triggers further volatility
Just ahead of the ECB policy decision on Thursday, there were reports that the ECB had warned EU finance ministers that there could be vulnerabilities in the Euro-Zone banking sector.
At the same time, there were reports that US First National bank was facing a hole of up to $25bn, although deposit withdrawals had slowed.
Risk appetite dipped sharply in response with sharp market moves. There was a fresh recovery in confidence later in New York after reports that JP Morgan and other major US banks were looking to support First National Bank.
Later reports suggested that major banks will provide up to $30bn in deposits for First Republic and the Fed also announced that it will provide liquidity through the discount window.
In this context, there was a strong rebound in risk appetite.
ECB: Inflation concerns trump banking fears
The ECB announced that it would proceed with the 50 basis-point hike to 3.50%.
According to bank President Lagarde, there were 3-4 members who opposed the move and wanted to take a wait and see approach at this time.
There was a notable shift in forward guidance with the bank dropping specific guidance on further rate hikes and insisting that decisions would be data-dependent and determined by the dynamics of underlying inflation.
The bank was still concerned over inflation with inflation projected to be too high for too long. According to Lagarde, there will be a lot of further ground to cover if the baseline scenario is met, but this is a big caveat.
US jobless claims decline
US initial jobless claims declined to 192,000 in the latest week from 212,000 the previous week and below consensus forecasts of 205,000 while continuing claims declined to 1.68mn from 1.71mn.
Weak Philly Fed index
The Philadelphia Fed manufacturing index recovered only marginally to -23.2 for March from -24.3. This was well below consensus forecasts of -15.5 and the seventh successive month of contraction.
There was a steeper decline in new orders on the month and shipments also dipped sharply into contraction territory while unfilled orders also continued to decline. Employment and average workweeks also declined on the month to the lowest readings since May 2020 while there was a significant net easing of inflation pressures.
The prices received index dipped to the lowest level since June 2020.
Companies were less optimistic over the outlook, but inflation pressures were expected to decline only slightly.
Fed expectations stabilise
Despite choppy trading, Fed Fund futures contracts overall attempted to stabilise with markets more confident that the Fed would opt for a 25 basis-point rate hike to 5.00% at next week’s policy meeting.
Dollar loses some ground
The First Republic support and recovery in risk appetite curbed defensive US currency support and the dollar lost ground. Although sentiment was volatile, the ECB decision also provided limited net support with the decision seen as a vote of confidence in the financial sector.
14.00: US University of Michigan consumer confidence
Key events over the next week
March 22nd: Federal Reserve policy decision
Gun to head challenge – Update
Today’s trade idea
Have a great week everyone.
Get award-winning FCA regulated signals and levels on over 30 markets, as well as education resources so you never trade alone.