In a week when the US Federal Reserve as well as the Bank of England announced policy rate hikes of 25 basis points each, the EUR/USD pair closed with gains.


Forex chart - market report, week 1 Apr 2023

Source: Bloomberg

The EUR/USD pair was on the up, closing the week at 1.0760 USD. The euro gained — it went as high as 1.0900 USD on Thursday, 23 March — despite the banking crisis threatening to grip the Eurozone following the troubles at Credit Suisse, which is now set to be acquired by its rival UBS Group.

In its much-awaited Federal Open Market Committee (FOMC) meeting, the US Federal Reserve’s (Fed) policy rate decision was along the expected lines as it raised the rate by 25 basis points. The Fed is walking a tightrope, attempting to keep inflation in check while seeking to prevent contagion effects arising from the collapse of Silicon Valley Bank and Signature Bank.

The Fed wasn’t the only central bank to raise key rates last week as similar action followed in the United Kingdom, Switzerland, and Norway. The action in the UK came after inflation rose to 10.4% annual rate in February, prompting the Bank of England to lift its key rate by 25 basis points.

On the events front, it will be another crucial week in the United States as the Core Personal Consumption Expenditure (PCE) Price Index data — which is the Fed’s preferred gauge for inflation — will be released on Friday, 31 March. But before that, the fourth-quarter gross domestic product (GDP) data will be out on Thursday, 30 March.

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Gold chart - market report, week 1 Apr 2023

Source: Bloomberg

Gold prices enjoyed another surge last week. Having moved within a touching distance of the 2,000 USD level in the week prior, gold prices eclipsed the threshold, reaching 2,003.51 USD — their highest level since August 2020 — on Monday, 20 March. However, they eventually settled at 1,978.39 USD.

The crisis in the banking system in the West has coincided with the rise in prices of the precious metal. They have gone up nearly 9% since March 8.

After enduring a torrid week before last week when they lost a whopping 13% and slipped to their lowest level in 15 months, oil prices made modest gains as the banking crisis in the United States and Europe eased slightly. Brent futures rose 2.8% for the week, while US crude futures were up 3.8%. Crude prices were hampered by the US’s admission that refilling the country’s Strategic Petroleum Reserve (SPR) may take several years.

However, oil prices were supported by strong demand expectations from China — the world’s biggest importer of crude. Meanwhile, Russia’s plan to cut oil production between March and June will not be as high as expected. The latest update on Russian production will ease supply worries and likely help stabilise the prices of the commodity.


Crypto chart - market report, week 1 Apr 2023

Source: Bloomberg

The Group of 7 (G-7) countries and the European Union (EU) are seeking to promote tougher regulations of the cryptocurrency sector and aiming to increase business transparency and consumer protections, amid lingering concerns about potential risks to the global financial system posed by digital assets.

Their plan follows the November 2022 collapse of the major cryptocurrency exchange Futures Exchange (commonly known as FTX), which has laid bare the poor governance of the industry and sent shockwaves through financial markets worldwide. The global cryptocurrency market capitalisation stood at 1.16 trillion USD on Sunday, 26 March.

Bitcoin, the world’s leading cryptocurrency, started the new week by consolidating above the 27,000 USD support level. The currency was trading at 28,008 USD at the time of writing. Meanwhile Ethereum, the second-largest digital currency by market capitalisation, was trading at 1,776 USD.

In a development that would raise the spectre of regulations in the cryptocurrency space, Do Kwon, a South Korean national who co-founded Terraform Labs and developed the TerraUSD and Luna currencies, has been arrested and charged with fraud after his Terra-Luna stablecoin and crypto project lost an estimated 40 billion USD last year.

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US stocks

Name of the indexFriday’s close*Net change*Net change (%)
Dow Jones Industrial Avg (Wall Street 30)32,237.53375.551.18
Nasdaq (US Tech 100)12,767.05247.1711.97
S&P 500 (US 500)3,970.9954.351.39
Source: Bloomberg
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.

The instability in the banking sector kept the US stock indices in check as they settled for modest gains following volatile movement over the course of the week. The Nasdaq was the biggest gainer at 1.97%, followed by the S&P 500 index at 1.38%. The Dow Jones rose by 1.18%.

The crisis following the collapse of Silicon Valley Bank in early March has seen investors flock for the shares of the top 5 companies by market value. Apple, Microsoft, Google-parent Alphabet, Amazon, and Nvidia have all risen between 4.5% and 12% since March 8. According to analysts, these stocks have gained as investors sought stronger and more viable companies in the wake of the ongoing turbulence in the banking sector.

The strength in the mega-cap stocks has corresponded with weakness in small-caps as the benchmark for the latter underperformed the former for a fifth successive week. It is in line with analyst expectations since they assert that the strength in mega-caps covers up weakness elsewhere.

This week will be crucial in terms of data releases. The Conference Board (CB) Consumer Confidence data — which measures the level of consumer confidence in the US economy — is due for a Tuesday, 28 March release. Meanwhile, the fourth-quarter GDP numbers in the US will be released on Thursday, 30 March.

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