1 Minute Market Rundowns - brought to you by the BCB Trading Team

Market reassess risks to European lenders

This Daily Digest will cover:

  • 🪙 Market reassess risks to European lenders
  • 🏦 Monetary policy divergence opening up
  • 🌏 EUR to continue bullish momentum
  • 💵 Crypto the golden child

Where to start?

Well, what a market it has been to come home to after a leave of absence. There is a distinct lack of consensus in the market and risk taking looks to be light. My medium term view that risk puts in new cyclical lows as financial conditions continue to tighten remains intact, but aggressive balance sheet expansion by the Fed seems to be staving that off for now. As the liquidity injection calms fears of wider contagion, divergent monetary policy between Europe and the US is opening up interesting opportunities in FX.

The narrative at the end of last week that banking turmoil was shifting back from the US to Europe was the key driver of markets. Sentiment this week has turned more optimistic as the market has reassessed risks to European lenders and appears calmer. Once the market begins to look past the banking crisis, respective central bankers are striking a different tone. US Treasury yields have been bouncing around like crazy, but the Fed’s hand has seemingly been forced and the shift down in the curve is clear. On the other hand, Andrew Bailey sounded relatively hawkish in his remarks yesterday. While saying that rates should not be taken to the 2008 peak, he stressed how the UK banking system is in a sound position and that inflation remains the key focus, with further rate hikes possible if inflationary pressures persist. Likewise, his counterparts at the ECB reiterated their commitment to ongoing hikes. Isabel Schnabel said she wanted the ECB March statement to include a reference that more hiking was possible. We will hear more from Christine Lagarde today. The divergence in monetary policy comes on the back of what is seasonally a good time to be short USD and is coupled too with the (somewhat bizarre) view of some participants that the successful ringfencing and unwinding of the affected banks cauterises the wound and sets the stage for a continuation of stronger-than-expected growth. I could see a continuation in bullish EUR/USD momentum up to 1.1000 and am positioned as such.

Crypto deserves more than a footnote after its performance the last couple weeks. After initially benefiting from ideological demand amid the banking collapse, it then rode the wave of liquidity all the way up to 29,000 BTC/USD. Its performance has cooled this week and I fear it will still get caught in the cross current of high beta equity performance despite its recent outperformance. It takes a brave trader to go short though and my view remains buy on dips. Good luck out there – it isn’t easy. Ask the hedge funds.

James Laidlaw
OTC Trader

Cryptos Lazarus like rise continues

This Daily Digest will cover:

  • 🪙 Cryptos Lazarus like rise continues
  • 🏦 Bank stocks slump amid panic
  • 🌏 Global yields plunge
  • 💵 US CPI today – does it matter?

Where to start?

The fallout from Silvergate/Signature/SVB/insert name here continues as the markets sense blood and bank stocks get hit around the globe. Yields have been destroyed as markets expect that central banks will not hike as much or even at all in the face of the biggest banking crisis since 2008. This has seen the USD have the wind taken from its sails and stock markets globally suffer sharp (if in some ways surprisingly muted) falls.

The real story over the last 36 hours has all been Crypto and its ability to weather everything and snap back. USDC losing its peg, Silvergate and Signature shutting down and the SVB debacle saw us trading sub 20,000 BTC and 1350 in ETH. The steps taken by the US to shore up all depositors then saw a remarkable rally that has seen BTC trade almost at 25,000 and ETH back above 1700. It appears a combination of short sellers getting ruined, Binance announcing the switch of their recovery fund from Busd to BTC started the move.

The fact is though that there is no small amount of realisation that the current situation the financial industry finds itself in is part of the reason why Crypto was born. Yes, we are reliant on fiat transactions still for now, but Crypto is showing why it is the future of money. If, or when in my view, we break the key 25,200 level in BTC this move will gather momentum and I suspect we will see 28,000/30,000 in quick fashion.

US CPI is up at 12.30 and a few days ago I would have said it was super important. However the game has changed with the potential banking crisis wagging the tail of the FOMC. The likes of Goldmans have come out saying they think the FED will pause this month, whereas a week ago 50 Bps was priced in. I think we need to see a real outlying number to affect the broader markets today. Expectations are 6% and only 6.4 or above will change the market’s new view that the rates are close to their peak. Sub 5.8 yields will crash and stocks could have a real turn around Tuesday rally.

As always, good luck!

Stocks, risk assets and crypto plunge

This Daily Digest will cover:

  • 📊 Stocks, risk assets and crypto plunge
  • 🏦 Silvergate collapse and SVB plunge spreads to trad banks
  • 🗂 NFP in focus today but I struggle to see a number that turns the mood

What a 48 hours we have seen in the markets.

The collapse of Silvergate has spread to the wider banking community and even the bond market as US yields collapsed in response. Whilst I see little reason for sustained contagion within the US banking system, the market found a reason to sell off and gather some momentum that it had been looking for. The S/P 500 has broken cleanly below its 200 day moving average and the FTSE has broken its uptrend for the year in spectacular fashion.

Crypto has had the wind taken out of its sails with BTC sub 20,000k this morning and the sickening sight of ETH starting with a 13 handle. No change in my view in the medium term as you would expect, but I cannot put my hand out at these levels in this environment. 18,400 is a severe possibility should risk get sold again this afternoon.

FX is a mess with unwinding of positions the name of the game as funds run for the sidelines. This has seen GBP back to 1.2000 this morning in a frankly senseless move to me. The BOJ held its policy unchanged which has added fuel to cross/JPY short covering, but should risk get hit this afternoon, I think cross/JPY short is the play with GBP/JPY and EUR/JPY my picks.

All this leads me to this afternoon’s NFP which would normally be something I would lay out the various scenarios and how I think the market will react. Frankly this seems unnecessary today as I struggle to see a number that will reassure markets. Big numbers, interest rates – up risk off. Bad numbers recession fears will snuff out any rally with the current mood and I suspect a late in the day sell off will ensue. An inline number is probably the best chance we have for the market to step back and take a breath, but even then I am worried with the current market issues who will buy risk on this particular Friday…

As always, good luck out there.

This site uses cookies

We use cookies to improve user experience and analyse website traffic. By clicking “Accept“, you agree to our website’s cookie use as described in our Cookie Policy