IFX Market Report: Monday 13th March 2023

Friday saw one of the biggest banking shocks since the great recession, causing panic for thousands of SME’s particularly start-up businesses in the Fintech sector. Silicon Valley Bank, America's 16th largest bank, collapsed in spectacular fashion Friday just days after it announced big losses, failing at attempts to raise funds or seek out a buyer, and creating the biggest bank failure in the United States since the Great Recession. Shortly after the announcement and despite a town-hall meeting from the CEO saying that funds would be safe, the London branch of SVB then halted trading.

The news put some pressure on the USD, as the impact will likely cut chances of a near term rate hike from the FED. The FED will be treading carefully over the next few months as they look at other banks who are on the list for potential insolvency. They have already announced a $25bn backstop fund available to eligible firms in order to prevent liquidity issues.

UK GDP figures on Friday for January showed unexpected growth of 0.3%, this was despite major strike action through many sectors that month, and up from -0.5 in December.

U.S. Non farm payrolls came in way above expectations for the second consecutive month. Consensus was that they would be at 200k however data posted a 311k figure.

After the SVB news the dollar fell across the board, with GBPUSD moving from 1.1940 to above 1.21 and EURUSD hovered around 1.07, up from 1.06. The Non farm data did pull the dollar back slightly to 1.2040 against the pound and back below 1.07 against the Euro.

There would have been some very sleepless nights for anyone involved in the SVB meltdown on Friday, however this morning brought major relief for the clients of SVB UK as HSBC announced its ‘£1’ takeover of SVB UK, thus protecting all client deposits which will be available for withdraw today.

The market is still extremely shakey, particularly in regards to banks in the US, with Shares in U.S bank First Republic falling 60% in pre-market trading today.

The week ahead will likely be dominated by talk of stability in banks, but data to watch out for includes U.S CPI data tomorrow afternoon.

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