As the North American session begins, the Japanese Yen (JPY) is the strongest, while the Euro (EUR) is the weakest. Today, the banking contagion spreads to Europe, with Credit Suisse shares plummeting nearly 25% (referring to the Swiss company's US shares). The once-prestigious Swiss bank's stock closed at $2.51 yesterday, with a current premarket price of $1.97. Shares closed at $3.04 in 2022, $9.64 in 2021, and $12.80 in 2020, indicating a consistent downward trend. Alarm bells are ringing louder by the day.
The Swiss Franc (CHF) follows closely behind the EUR as the weakest, with both currencies experiencing devaluation. The upcoming Federal Reserve meeting has been the center of attention, with a 65% chance of a rate hike and a 35% chance of no hike. Furthermore, the Fed funds futures contract for January 2024 has dropped to 3.94%. Prior to the Fed's meeting next Wednesday, the European Central Bank (ECB) will convene tomorrow.
A source has mentioned that the ECB has observed no fundamental changes in the policy outlook. ECB President Christine Lagarde has pre-committed to a 50 basis point rate increase, but will there be hesitation? It's likely for some shift. If it isn't in an easing of the hike, it would be in the tone of Lagarde/the statement. The EURUSD attempted to rise above a swing area between 1.0744 and 1.0752 during the late Asian session but failed. In recent hours, the pair has experienced a steady and sharp decline, falling below its 100-hour and 200-hour moving averages, and reaching a lower swing area between 1.0573 and 1.0585. Below that level, the 100-day moving average stands at 1.05493. Immediate resistance is now at 1.0611-1.06143, with the 200-hour moving average above that at 1.0638. The price must surpass these levels to enhance the bullish bias.
U.S. shares are experiencing a sharp decline in early trading, with U.S. and European yields also trending downward. The U.S. 10-year Treasury note yield has dropped approximately 11 basis points to 3.53%, while German 10-year bund yields have fallen by 21 basis points. A current snapshot of the markets shows:
- Spot gold trading up $14 or 0.75% at $1917.75
- Spot silver trading up $0.41 or 1.88% at $22.09
- WTI crude oil prices declining by $1.14 to $70.18, testing the December 2022 low of $70.08
- Bitcoin trading at $24,899 after reaching a high of $26,533 yesterday (its highest level since June 2022)
In premarket trading for U.S. stocks, major indices are notably lower:
- Dow Jones Industrial Average down -571 points after rising 336.26 points yesterday
- S&P 500 Index down -71.79 points after rising 63.53 points yesterday
- NASDAQ Index down -181 points after rising 239.31 points yesterday
Major European equity markets are also marking significant declines:
- Germany's DAX down 2.9%
- France's CAC 40 down 3.51%
- UK's FTSE 100 down 2.68%
- Spain's IBEX 35 down 3.99%
- Italy's FTSE MIB down 3.5%
In the U.S. debt market:
- 2-year yield at 4.037%, down 19 basis points
- 5-year yield at 3.660%, down 13.4 basis points
- 10-year yield at 3.53%, down 11 basis points
- 30-year yield at 3.689%, down 7.2 basis points
In European markets, benchmark 10-year yields have fallen by 14 to 24 basis points, as traders reduce expectations for future ECB policy changes.
