Ian Reynolds
Bill Ackman gives us the longest tweet ever, about an Armageddon-like run on banks following the collapse of Silicon Valley Bank.
SBV US website
Their UK website needs to be updated
UK prepares cash lifeline for tech companies hit by Silicon Valley Bank collapse
US Discusses Fund to Backstop Deposits If More Banks Fail. Bloomberg
In reality the mass movement of small deposits to SIBs (systemically important banks) relies on consumers who, mostly, have never heard of SVB. There will be a lot of issues for the depositors at SVB (mostly tech companies) and undoubtedly insolvencies, but the FDIC or whoever, should be able to contain the contagion.
What is more important to consider for traders / investors is where this leaves the FED and interest rates. Can they still hike on 22 March? The FED, with current legislation, can have no influence on how the SVB situation unfolds so they'll have to be reactive. And that doesn't bode well.
And what does a flight to quality trade look like? Supposedly treasuries from the 2 year note price action. Yield has dropped 50bps since Thursday.
It'll be another interesting week.
US CPI this week is a focus is we can avoid the bank run.
Australia
A lot of chatter around the change of tone in RBA Governor Lowe's statement after the rate hike. Maybe a slight change of stance because as usual he wants to make people happy. That's not in the mandate of the RBA (their "duty" if you look at the RBA website: https://www.rba.gov.au/ ).
The publication on 21 March of the minutes of the 7 March board meeting, will give further clues but it's probably a waste of time. They are reactive.
More focus for traders should be on the level of monetary policy. A cash rate of 3.6% and a trimmed mean CPI print last at 6.9% suggests the RBA is miles away from the first base, which is where the FED is at ~ 4.5% fed funds and perceived core inflation (PCE YoY).
Until short rates get to the levels of CPI, whatever your measure is, you're miles behind the curve.
So there are 2 distinct trades. Either the AUD goes up because more interest rate rises are need in Australia than in US, to get to a neutral stance on inflation, or RBA is so far behind the curve that it has effectively lost control of monetary policy and investor confidence in RBA will shatter. I reckon the latter.
AUD / USD Trade Update
Short 0.7000
Short 0.7100
Stop moved down to 0.6940 from 0.7225
4 closes below fib at 0.6605 (with candles above) looks good for a further move down. Maybe be a big knee-jerk reaction to SVB / contagion possibility so have moved stop down to 0.6940. Seems a mile away but you never know.
Consolidation below 0.6605 seems more likely with a move down to the previous lows near 0.6200 immediately target. Will take 50% profits at that level.
In Case You Missed It
- RBA Hikes 25bps: Monetary Policy Statement
- The Bank of Japan (BoJ) kept its key short-term interest rate unchanged at -0.1% and that for 10-year bond yields around 0% during its March meeting by a unanimous vote. TradingEconomics.
- Bank of Canada maintains policy rate, continues quantitative tightening
- US economy adds 311,000 jobs in February, topping estimates but unemployment rate ticks up, inflation neutral.
- Xi retains China’s central bank head in boost to markets
Economic Releases This Week
