Good morning and welcome to episode 806 of ‘Talking Bull’. Here are the latest headlines today, Financial fears intensify again, ECB expectations dip, Euro slides, Tentative relief on Thursday, US retail sales edge lower, New York manufacturing index slide, US PPI inflation moderates, Fed expectations continue to fluctuate, Yen surges on contagion fears, Oil slumps, Limited UK budget reaction, Stronger Australian jobs data & ECB decision Thursday.
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!
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Joe hit target on EU50 for a 2.77R win. Steve was onside 1.34R on USDCAD.
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 202.55% collectively since we began recording Talking Bull on the 30th October 2019.
Financial fears intensify again
After Wednesday’s European open, Credit Suisse announced that the Saudi National Bank would not be increasing its stake in the bank. The news triggered fresh fears over the outlook for Credit Suisse, especially given a potential contagion effect from SVB.
There was a fresh slump in its share price and also a wider contagion effect with European banks under heavy pressure as fear intensified.
ECB expectations dip
With increased fears over the financial sector, there was a sharp re-pricing of ECB expectations with the chances of a 50 basis-point hike on Thursday cut to around 20%.
ECB council member Constancio also called for a maximum rate hike of 25 basis points.
With lower yields and a sharp ECB re-pricing, the Euro came under heavy pressure during the day with heavy losses against the dollar and yen.
Tentative relief on Thursday
There was an element of relief on Thursday as the Swiss National Bank stated that it would provide emergency liquidity support to Credit Suisse with a CHF50bn loan facility.
Equities regained some ground and the Euro recovered some ground.
US retail sales edge lower
US retail sales declined 0.4% for February and in line with consensus forecasts after a revised 3.2% jump the previous month. Underlying sales also met expectations with a 0.1% decline while the control group recorded a 0.5% monthly increase.
New York manufacturing index slide
The New York Empire manufacturing index dipped sharply to -24.6 for March from -5.8 previously and much weaker than consensus forecasts of -8. There were also notably negative readings for new orders and production. Employment continued to decline on the month and there was a limited easing of inflation pressures.
Companies were less confident in the outlook and inflation pressures are expected to decline more substantially.
US PPI inflation moderates
US producer prices declined 0.1% for February compared with expectations of a 0.3% increase with the annual increase slowing to 4.6% from 5.7% and well below expectations of 5.4%. Core prices were unchanged on the month with the annual rate slowing to 4.4% from 5.0% and also below expectations of 5.2%.
Fed expectations continue to fluctuate
There was a fresh shift in Fed Funds pricing on Wednesday with the most likely outcome now seen as no change in rates next week.
There was a fresh shift on Thursday with a 0.25% hike seen as the most likely outcome.
The US 2-year yield briefly dipped to 6-month lows at 3.75% before a recovery to near 4.00%.
Yen surges on contagion fears
The slide in US and European yields, together with a sharp decline in equities triggered fresh defensive support for the yen.
The yen lost some ground on Thursday in very nervy trading.
Risk aversion and demand fears helped trigger a renewed slide in oil prices with global benchmarks sliding over 5% on the day before a recovery.
Limited UK budget reaction
As far as markets are concerned, the UK budget had little impact with the slide in UK and global equities and risk aversion having a more substantial impact.
Stronger Australian jobs data
The latest Australian labour-market data recorded an employment increase of close to 65,000 for February compared with expectations of 48,000 with unemployment declining to 3.5% from 3.7%.
ECB decision Thursday
The ECB will announce its policy decision on Thursday, Both the decision and press conference from ECB Lagarde will trigger further high volatility.
12.30: US Philly Fed index
12.30: US jobless claims
13.15: ECB policy decision
13.45: ECB press conference
Key events over the next week
March 22nd: Federal Reserve policy decision
March 23rd: Swiss National Bank policy decision
March 23rd: Bank of England policy decision
Gun to head challenge – Update
Today’s trade idea
Have a great week everyone.
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