Lira crash, ECB boosts purchases, Chinese Sanctions, US data, Powell talks cryptos

Wall Street is off to a positive start as the Nasdaq makes a comeback as restrictive measures derail the reopening trade and after ECB delivered on its pledge to ramp up the pace of purchases with the Pandemic Emergency Purchase Program.  Global bond yields are lower across the board with the 10-year Treasury yield lower by 3.2 basis points at 1.689%.

US stocks are rising following some calm in the bond market while shrugging off the Treasury Department’s sanctions on Chinese individuals.

Powell (Bitcoin)

Financial markets are bracing for a wrath of Fed speak that includes three appearances for Fed Chair Powell.  Today’s comments from Powell mostly focused on how central banks can innovate in the digital age.  Powell stated the obvious in that the US would not be the first with a central bank digital currency (CBDC).  Cryptocurrency traders rejoiced in Powell’s comment that crypto is essentially a substitute for gold rather than the dollar.

Bitcoin also received some positive comments from Indian finance minister Nirmala Sitharaman.  She stated that the ministry does not plan to abolish Indian innovations associated with Bitcoin and its underlying blockchain technology.  India is taking back its harsh stance for cryptocurrencies and that should alleviate some short-term regulatory fears.  Bitcoin is down slightly as it appears to be stuck in a consolidation pattern.

TRY

Turkey’s currency crisis emerged over the weekend after President Erdogan sacked central bank Governor Naci Agbal.  Agbal was one of the main reasons investors had restored confidence in holding Turkish assets.  He raised interest rates 875 basis points since November and helped stabilize the lira.

Turkey will now have a fourth central bank chief in just three years.  The new governor, Sahap Kavcioglu, focused his first comments on fostering economic stability with lower borrowing costs, which happens to be in-line with President Erdogan.

The lira in early trade fell as much as 17% to the dollar, credit default swaps surged the most on record, and the stock index slumped over 6%.  The crisis in Turkey will likely be isolated, so the rest of the emerging market FX should not have to worry about contagion fears.  Turkey will be forced to impose capital controls to stabilize markets, but that could be a lesson in futility.  The Turkish central bank will likely deliver rate cuts and calls for a 9 handle with the lira against the dollar will become the consensus in FX.

Chinese Sanctions

US and allies are poised to deliver coordinated sanctions on China over human rights violation claims with Uyghur Muslims.  Politico reported that sanctions will vary amongst the US, Europeans, and Canadians.  The expected sanctions come after last week’s first face-to-face meetings with the Biden Administration and Chinese officials in Alaska.  China Foreign Ministry Chunying noted “it was a timely and useful dialogue that enhance mutual understanding.”  The tense talks between the world’s two largest economies were hailed as useful but will likely be dragged out as both sides try to secure allies.

US Data

The Chicago Fed National Activity Index plummeted into negative territory as the auto industry continues to struggle to get their hands-on computer chips.  The February headline reading came in at -1.09, much worse than the +0.72-consensus estimate and revised higher 0.75 reading.

The housing market is still strong but is showing signs of cooling.  Existing home sales fell to a six-month low, low inventories and rising mortgage rates will likely counter each other later this year.  Inventories posted a record decline of 29.5%.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst – The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

Ed Moya

Ed Moya

Source

Leave a Reply

Your email address will not be published. Required fields are marked *