Stocks continued to rally during the US session on Tuesday, building on Monday’s rally. Traders continued to become optimistic following Treasury Secretary Janet Yellen’s latest reassurances to contain the banking crisis.
The major indices in the US rallied by over 1 percent while the VIX continued to trickly lower. It was a similar story at the European close as green shoots were seen everywhere.
In the FX market the EURUSD pair continued to rally towards the best levels of the year, with EURGBP shooting high as sterling lagged the US dollar.
It should be noted that proxy for global growth and risk, the AUDUSD pair fell to new lows, marking a divergence with the current risk-on sentiment from the market at present.
Gold did fall however, creating a sign that the market was in better spirits. Gold had seen a meteoric rise above the $2,000 level at the start of the week and softened back under $1,950.
Other metals such as silver and copper continued to underperform. Copper has been fairly muted lately as the yellow metal steals the thunder from the red metal.
The improved mood could also be attributed to better housing data. NAR Chief Economist Lawrence Yun said “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing, and the local economies are adding jobs.
Existing home sales in the US jumped 14.5 percent to a seasonally adjusted annual rate of 4.58 million in February 2023, snapping a 12-month slide and representing the largest monthly percentage increase since July 2020. Markets were expecting a smaller 5 percent rebound.
The median existing-home sales price decreased 0.2% from the previous year to $363,000. The inventory of unsold existing homes was unchanged from the prior month at 980,000 at the end of February, or the equivalent of 2.6 months’ supply at the current monthly sales pace.
Investors now expect a slower pace of tightening from the Federal Reserve in light of the banking crisis. Traders now are pricing in an 83% chance of a quarter-point rate hike according to CME Fed watcher tool.