EURUSD licks its wounds ahead of ECB as financial market fears ease

Global markets take a sigh of relief after a volatile Wednesday that bolstered risk aversion amid concerns about the major banks’ financial health. Adding strength to the stabilization move could be the policymakers’ efforts to tame the fears that the financial crisis of 2008 is back on the table.

With this, the US Dollar bulls pare the recent gains and join hawkish ECB talks to renew the EURUSD upside, following the Euro pair’s biggest daily slump in six months. Even so, NZDUSD remains on the back foot amid downbeat NZ GDP whereas prices of Gold and Crude oil remain pressured.

Further, USDJPY bears the burden of sluggish yields to stay depressed for the second consecutive day while USDCAD ignores downbeat Oil prices by printing minor losses.

Elsewhere, BTCUSD and ETHUSD pick up bids after snapping a four-day winning streak amid fears emanating from Europe’s Credit Suisse, as well as Silicon Valley Bank and Signature Bank from the US.

Following are the latest moves of the key assets:

• Brent oil remains pressured at the lowest levels since December 2021, indecisive around $74.30 by the press time.
• Gold struggles for clear directions after reversing from six-week high the previous day.
• USD Index snaps two-day uptrend while paring the biggest daily gain in a week near 104.40.
• Wall Street closed mixed and so did equities in the Asia-Pacific region but shares in Europe and the UK print mild losses of late.
• BTCUSD and ETHUSD regain upside momentum around $24,650 and $1,660 in that order after snapping four-day uptrend the previous day.

Pessimists aren’t off the table

Although the Swiss National Bank (SNB) is up for helping Credit Suisse (CS) and the US Government is ready to infuse $2.0 in the market to tame the liquidity crunch, the traders aren’t convinced of financial optimism as bank fallouts are the initial signs of economic crisis.

CS joined SVB and Signature Bank to flag liquidity fears after multiple central banks propelled benchmark rates in the last few months. However, hopes of a firmer economic transition in China and talks of more Fed rate hikes keep the US Dollar and Gold on the bull’s radar.

EURUSD, on the other hand, hesitantly cheers the hawkish hopes from the ECB even as economic fears in the region escalate. Further, downbeat yields weigh on the USDJPY whereas worrisome statistics from New Zealand weigh on NZDUSD. Further, Oil prices fail to ignore demand woes whereas Gold approaches YTD tops due to haven demand.

Wall Street closed mixed but US stock futures print mild gains whereas the equities in Europe and the UK remain depressed as yields recover.

Cryptocurrencies also regain upside momentum amid hopes of more liquidity in the market and extra sources for the BTCUSD and ETHUSD traders.

• Strong buy: USDJPY
• Strong sell: ETHUSD, GBPUSD
• Buy: USD Index, USDCAD, Nasdaq, EURUSD
• Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

ECB, financial market updates are the key

Although there’s no surprise in ECB’s 0.50% rate hike, a wild 25 bps rate hike, or no rate lift at all, could drown the EURUSD prices amid a liquidity crunch at the major banks. Also important to watch will be the speech from ECB President Christine Lagarde as EURUSD traders eye fewer rate hikes, as well as nearness to policy pivot.

On a different page, second-tier US data and bond market moves will also be important to gauge near-term market performance and overcome the financial crisis.

May the trading luck be with you!