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The winners and the battered of a stormy week. Bitcoin and oil on opposite sides

The winners and the battered of a stormy week. Bitcoin and oil on opposite sides

created Daniel Kostecki17 March 2023

It's been a very exciting week in the financial markets, in which as much has happened as usually happens in months or years. Events related to bond market volatility and interest rates will go down in history, because no one knows how to price the current reality.

Inflation is still a problem

Central bankers can put on a good face for a bad game, but they also have to continue to fight inflation, after all, that's their mandate, not bail out private banks. So interest rates in the eurozone went up, but EBC on Friday he had a closed-door meeting to further discuss the situation regarding banks, i.e. the topic is still open and raises uncertainty among decision-makers.

Nevertheless, trading in the markets must go on, so where have investors gone with their money or their clients'? Here is the list of the week's winners and losers:

  • Bitcoin – is undoubtedly the star of this week. BTC/USD growth is almost 30%. in response to problems with stablecoins, the traditional banking sector and the increase in liquidity.
  • Silver, in a week, the silver metal's quotations rose by almost 8 percent, making this rate of return the most popular market among speculators. It is also the biggest gain since late October when silver started its journey north to around $25.
  • Nasdaq xnumx, the technology index rose by almost 16 percent before 00:6,7 p.m. CET. on a weekly basis. This is the biggest gain among the popular stock indices. Declining discount rates, high beta and increased liquidity may have supported tech stocks. Additionally, in sectoral rotation, it is this class of companies that seems to be preferred.
  • Gold is up more than 16 percent this week, at least until 00 p.m. CET, approaching $5 an ounce. On the other hand, the price expressed in Polish zloty is record-breaking (depending on the source of quotations).
  • 30y US bonds, the price of these papers increased by over 2,5 percent, where a powerful short squeeze could go through the bond market this week.
  • The Japanese yen was the best performer in the currency market, gaining more than 2 percent against the dollar. in a week. The yen, a safe-haven currency and the only currency for which the curve of expectations for interest rate hikes, albeit small, remains positive across the entire span up to a year.

Which markets are among the most affected?

  • Petroleum, a barrel of WTI fell by more than 13 percent in a week. to the lowest level since December 2021. On the one hand, the banking crisis increased fears of a recession and a drop in demand, and on the other hand, raw material inventories increased. This also shows that consumption is not so strong.
  • German DAX index fell by over 3 percent, where the biggest problems and pogrom appeared on local banks.

The market is currently focused on the increase in liquidity in the US, wondering to what level the Fed's balance sheet will increase, what will be the growth rate, and where to run with the money, because the sector's problems are not fully resolved. As you can see, there is no clear answer here, because assets considered safe, such as gold or yen and US bonds, but also very risky assets, such as bitcoin or Nasdaq 100 contracts, are becoming more expensive.

In other words, when liquidity rises, we have a buy-all environment, and when it falls, sell. We have returned to an era of massive speculation in a very volatile economy.

Will there be a twist in the narrative?

Perhaps we will find out on March 22 during the Fed decision, which will have an extremely difficult task to set new macroeconomic projections and somehow communicate further actions regarding monetary policy and refer to inflation, although here Jerome Powell has recently clearly communicated that he is disinflation.

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About the Author
Daniel Kostecki
Chief Analyst of CMC Markets Polska. Privately on the capital market since 2007, and on the Forex market since 2010.

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