Bond yields are declining sharply as banking worries flare up again. This time its European banks which have triggered the flight to safety. The catalyst is the refusal of Credit Suisse's biggest shareholder, Saudi National Bank, to invest anymore capital in the troubled bank. This, in turn, sparked selling in US regional bank shares as fears heighten that there is a distinct sensitivity to any rate increases within the sector. The CME Fedwatch Tool now has at 41% chance that the Fed does not hike on the 22nd of March. This is a stark contrast to earlier in the day when a 25 bps was priced in at over 80%. The US 02-year note which is a good proxy for Fed policy is down 6.5% on the day with the yield currently at 3.99%.
Credit Suise released a delayed annual report yesterday, which described weaknesses in its financial controls. The report was delayed after the SEC raised concerns over the bank's 2019 and 2020 cash flow statements.
In response the EURUSD has capitulated and dropped to its S3 pivot. This is a testament to the heightened volatility that is currently inherent in market movements. Its trend following EMAs and momentum-based stochastic have crossed bearishly. If the stochastic drops below 20 (blue arrow) and holds, further declines are a possibility.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.