Inflation in the US has dropped significantly - 15.3.2023

On Tuesday, the US dollar index remained almost unchanged after 3 days of strong decline. He was supported by good data on inflation. In February it decreased to 6% y/y from 6.4% y/y in January. This is the lowest since September 2021. Of course, US inflation is still far from the U.S. target. Federal Reserve (Fed) 2% y/y. However, investors do not rule out a slowdown in rate growth. According to CME FedWatch, the probability of its increase by 0.25% is 81.9% at the next Fed meeting on March 22. Previously, an increase of 0.5% was expected at once, but now this option is not even considered by participants in the forex market. Weak economic data for the New Zealand dollar came out this morning. The New Zealand Current Account 12-Months deficit hit another high -33.8 billion. In China, unemployment rose slightly in February (5.6%). The increase in China Industrial Production (+2.4% y/y) was less than expected (+3.9%). This has weakened the yuan a bit now.

Bitcoin quotes have grown strongly and reached the upper limit of the $21,000-25,000 range in which they have been for more than 2 months. Players are actively buying cryptocurrencies amid problems in the US banking sector due to the risks of bankruptcy of Silicon Valley Bank and Signature Bank. Yesterday, Bitcoin hit a 9-month high, but then corrected slightly down.

Yesterday, US stock indices rose. It is likely that the risks for the entire banking sector due to the possible bankruptcy of Silicon Valley Bank and Signature Bank seemed less significant to investors compared to the slowdown in the tightening of Fed monetary policy. Reducing inflation in the US to 6% y/y reduced the likelihood of a strong rate hike (4.75%). In addition, the shares of some regional banks showed strong growth PacWest Bancorp (+34%), First Republic Bank (+27%), Western Alliance (+14.3%), KeyCorp (+7%). On Tuesday, they won back the fall of Monday. The daily drop in the S&P 500 Banks sectoral index on March 13 was the highest since June 2020. Recall that the low rate of the Fed usually supports the growth of the stock market. Meta Platforms Inc plans to lay off 10,000 workers to cut costs. Its quotes added 7.2%. This had a positive impact on the entire sector and contributed to the growth of the NASDAQ Internet index by 2.7%. Significant economic data will be released in the US today: Retail Sales, Producer Price Index, Business Inventories and others.

On Tuesday, oil quotes continued to decline and updated the minimum since the beginning of 2023. The main reason for this is the risk of a reduction in global oil demand due to a possible financial and banking crisis in the US and a slowdown in China's Industrial Production in February. However, OPEC still expects an increase in oil consumption in China by the end of 2023. An additional negative for oil quotes was the data of the American Petroleum Institute on the increase in its stocks in the US over the week by 1.15 million barrels.

Natural gas in Europe on the ICE Dutch TTF is now trading at around $500 per 1,000 cubic meters. It has corrected slightly up from the recent low of $450. US gas quotes on the Henry Hub are trading at about $2.63 mmBtu.