Headlines

* White House to prepare new bank rule proposals after failures

* BoJ’s new deputy chief flags chance of change to yield control policy

* Wall Street gains with rosy outlooks from Micron, other companies

* Asian stocks drift lower with US futures after Nasdaq 100 enters bull market

FX: USD was slightly firmer in a narrow range “inside” day. Month-end and quarter-end flows were cited as reasons for the dollar stabilising against its peers. The US Treasury 2-year yield continued to move higher to 4.08% and closed above the 200-day SMA. The 10-year yield also advanced above the psychological 3.50% level and 200-day SMA at 3.51%.

EUR printed a “doji” candle signalling some indecision. It remains above 1.08 with ongoing ECB rhetoric still strong. GBP made another fresh month-to-date high at 1.2361. But cable couldn’t sustain the gains as downward pressure pushes against 1.23 support. USD/JPY moved sharply higher on month end and quarter end flows. Haven outflows also sank the yen. USD/CAD slid for a third day after breaking the bottom of the recent range around 1.3630/40. Oil and better risk sentiment are helping the loonie. Support sits at the 50-day SMA at 1.3538.

Stocks: US equities rose as waning fears of further banking turmoil eased. The blue-chip S&P 500 added 1.4% It closed above its 50-day SMA for the first time in over three weeks. The Dow finished 1% higher. The Nasdaq 100 outperformed, gaining 1.42%. The tech-heavy index entered a technical bull market after advancing 20% from its December low. The KBW Bank index rose 2.1%. First Republic Bank, a lender caught up in the recent banking upheaval, climbed 5.6%.

Asian stocks are mixed with little news flow to excite traders overnight.  The Hang Seng was modestly in the green after Alibaba’s fireworks yesterday. It shares rose more than 12% yesterday on news of its reorganisation plans. The ASX 200 was higher with strength in tech, mining and financials.  There was also an adjustment in RBA rate expectations after the recent softer monthly inflation data.

US equity futures are indicating a very modest positive open. European equity futures are also indicating a higher open +0.3%. The Euro Stoxx 50 cash market closed up 1.5% on Wednesday.

Gold gave up some of its gains from the previous day as the dollar held up. The precious metal remains above the early February high at $1959.

Day Ahead – Volatility drops

The noticeable improved sentiment across markets this week has seen some of the beaten down cyclical currencies rebound relatively strongly. The CAD and AUD lead the G10 currency gains this week. On the flip side, the safe haven yen has lost ground, even when you look through quarter end flows.

The risk-on mood is also seen in the VIX, otherwise known as Wall Street’s fear gauge. It spiked above 30 a few weeks ago but has dropped to 19 yesterday. Its long-term average lies around 20. All 11 sectors in the benchmark S&P 500 gained yesterday, led by tech, real estate and consumer discretionary. Semiconductor stocks, Intel and Micron both surged over 7% with the latter giving upbeat commentary on revenue guidance. Markets turn their attention to tomorrow’s US core PCE data, which it is hoped will show inflation is slowing.

Chart of the Day – EUR/AUD hits a one-year high and resistance

One of the key drivers for FX pairs is interest rates. And when one central bank is battling an inflation problem while the other has data hinting at the opposite, then that pair will move in the direction of the former. So it is with EUR/AUD where we have a procession of hawkish ECB speakers who indicate their wish for more rate hikes to fight ongoing price pressures. We get the latest eurozone inflation data tomorrow plus separate country data this morning. The flip side has seen softer than expected CPI data in Australia this week. That could give the RBA the chance to pause their rate hike path at its meeting next week. It could even point to a peak in rates at 3.6%.

EUR/AUD has been on an upward path since bottoming out at 1.5255 in late January. Since then, prices marched up to 1.62 in mid-March before the Credit Suisse turmoil hurt the euro. Most recently, we’ve seen swift action by the Swiss authorities and the containment of the European banking upheaval with the UBS rescue. The pair has pushed up to new cycle highs at 1.6277. A strong close above here, pushing beyond previous peaks from February last year will see bulls aim for 1.64 and the highs from August 2021. Support sits at 1.6138.