As the North American session begins and traders gear up for the dual employment reports from both the US and Canada, the GBP is the strongest of the majors, while the JPY is weakest. The USD and the CAD are tilting a little to the downside but are mixed. For the USD, it is higher versus the JPY by 0.49%, and lower vs the GBP and CHF (-0.51% and -0.36%).
Rates in the US are sharply are lower as risk off concerns start to hit the market. The Silicone Valley Bank contagion is spreading and fears of a contagion starts to swell. The tech lender bank lost nearly $2 billion selling assets following a larger than expected decline in deposits.
As interest rates soar value, the value of the bonds on banks books have fallen sharply. If deposits don't increase, if there are more defaults on their loans and people/businesses take more money out of the bank, the banks may be forced to sell those bonds at a deep loss - realizing the loss in the process on their books. The SVB is looking to sell stock to cover the loss. There shares are down sharply in pre-market trading.
That dynamic is something that could impact the calculus for future fed decisions. The flight to safety is underway.
Meanwhile, absent that news, the US jobs report (and the CPI next week) was expected to be the focus in the calculus for the next Fed decision. At least it was on Tuesday after the Fed chair's testimony in front of the Senate Banking Committee. On Wednesday, the Fed Chair purposely said to the House representatives that a 50 basis point hike was still data dependent.
The Canada jobs report, will be also released. Both will be announced at 8:30 AM.
The expectations is for US non farm payroll to show a gain of 205K (estimates range from 78K to 325K). The unemployment rate is expected to remain steady at 3.4%. That rate is tied for the lowest rate going back 70 years. Average hourly earnings are expected to rise by 0.3%. That is the same as last month. The average work week is expected to dip slightly to 34.6 from 34.7.
In Canada, the employment changes expected at 10.0 K after last months sharp 150K rise. The unemployment rate is expected at 5.1% up from 5.0%. For comparison, the full-time appointment last month gained 121.1K, while the part-time gain 28.9K. The participation rate last month came in at 65.7%.
In European news today the UK GBP caveman with a preliminary estimate for GDP at 0.3%. The data keeps the UK out of negative territory and keeps the window open for a potential increase in rates at the next meeting (in about two weeks) to combat the near double-digit inflation. BOE's Andrew Bailey said earlier this week that a rate hike is uncertain at the meeting.
In Japan, the BOJ kept rates unchanged as expected at Kuroda's last meeting as the bank's head. He will pass the torch to Kazuo Ueda.
A snapshot of the markets currently shows:
- spot gold is trading up $7.28 or 0.40% at $1836.67
- spot silver is up seven cents or 0.34% at $20.13
- WTI crude oil is trading down $0.56 at $75.16
- Bitcoin is back below the $20,000 level at $19,944
In the US stock market, the major indices are marginally lower after initiation sharp declines
- Dow Industrial Average -88 points after yesterday's -543.54 point decline
- S&P index is down seven points after yesterday's minus 73.67.2 point
- NASDAQ indexes trading down -2 points after yesterday's minus 237.65.0 point
in the European equity markets, the major indices are getting hammered on risk off sentiment:
- German DAX, -1.28%
- France's CAC, -1.14%
- UK's FTSE 100 -1.71%
- Spain's Ibex -1.61%
- Italy's FTSE MIB -1.54%
in the Asia-Pacific markets as it reacted to the shortfalls in the US and risk off sentiment
- Japan's Nikkei-1.67%
- China's Hang Seng index tumbled -3.04%
- Australia's S&P/ASX index-2.28%
- Hong Kong's Shanghai index fell -1.4%
The flight to safety flows are evident in the US debt market as yields are lower:
- 2 year yield 4.761%, -13.9 basis points
- 5 hours year yield 4.089% -13.1 basis points
- 10 year yield 3.821% -10.1 basis points
- 30 year yield 3.809% -6.0 basis points
In the European debt market, yields are also sharply lower:
