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- US stocks surge on bounce in regional banks and debt ceiling optimism
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News & AnalysisNews & AnalysisUS stocks surge on bounce in regional banks and debt ceiling optimism
18 May 2023 By Lachlan MeakinMajor US indices finished solidly in the green in a broad rally as risk appetite returned to the market amid optimism debt ceiling negotiations and a reassuring update from regional bank Western Alliance (WAL) which reported growth in its deposits. The Dow was up over 400 points, or 1.24% while the Russell 2000 outperformed, up over 2%, flying on a tailwind of the recovery in regional bank stocks which saw KRE (regional banking ETF) surge over 7%.
KRE chart, 7% rally in Wednesday’s session stalling at a key resistance level:
FX Markets
USD was bid despite the risk on trading conditions, although this did seem to put a limit on the Dollar’s gains, while the move higher in UST yields capped a further pullback. The Dollar Index rose to highs of 103.12 before paring beneath 103 and hovering around 102.85 throughout the latter part of the session.
JPY, and other traditional haven CHF, were weaker against the USD as risk appetite returned with the surging US equity market. The move higher in US yields and strong jump in equities was the primary driver of the moves in the Yen which has benefitted greatly recently from haven flows and lower US yields.
Cyclical currencies, AUD and NZD benefited from the risk on mode of the market, both making gains against the USD. The NZD outperformed after ANZ hiked its terminal rate forecast for the RBNZ to 5.75% by July, while it also sees a 25bp hike in June but sees a 20% probability of a 50bp hike. This saw AUDNZD further decline, pushing down to a low of 1.0630 and testing its recent support zone before bouncing modestly.
Commodities
Gold – a perfect storm of a stronger USD, Risk appetite and higher US treasury yields saw XAUUSD dump, breaking through the 2000 support level, and testing the major support level at 1975 before finding any buyers. 1975 was the bottom of the XAUUSD tight range we saw most of April and is a major level to watch.
Crude Oil soared in Wednesdays session, despite a big crude build, as debt ceiling anxiety waned and risk on returning to the market spurred growth hopes, USOUSD breaking it’s upper trend line to rally to a 73 handle before pulling back.
Today’s economic announcements see to important jobs reports, first up is the Australian April employment figures at 11:30 AEST. The unemployment rate is expected to hold steady at 3.5% while jobs created is forecast to come in at 24.8k. AUD and ASX volatility expected.
Later in the session US unemployment claims will be released where a drop to 253k from the previous 264k is expected.
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Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice.
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Market Analysis 15-19 May 2023
XAUUSD Analysis 8 – 12 May 2023 The gold price outlook is generally positive in the medium term. Although the close of last week's sell pressure bar indicates a significant loss of buying momentum, due to the sell-off during the week but the price is still moving above the 2000 support level after a rebound to test and then rebound. It...
May 18, 2023Read More >Previous Article
Target beats estimates – the stock is up
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