The United States Dollar slipped across the G10 currency board this morning as markets attempted to digest news from Switzerland this weekend that banking giant UBS will buy out its embattled competitor Credit Suisse in a “shotgun wedding” brokered by the Swiss government.
Overview
The $3 billion deal was intended to put an end to a crisis of confidence in Credit Suisse and stem fears swirling around the global financial sector, but jitters appear to persist this morning and share prices for the bank were down nearly 60%.Investors continue to assess the relative safety of the Buck following the collapse of Silicon Valley Bank and Signature Bank through the last two weeks. Signs of weakness in the US financial system are raising questions about the Federal Reserve’s meeting this Wednesday. As of now, though traders continue to trim bets, markets are ever-so-slightly in favor of a 25-basis point hike.Though the Fed finds itself in a different situation than other central banks around the world, with inflation appearing to have peaked and the jobs market showing signs of softening, divergence in US policy from other major central banks could spark a bigger trend of dollar weakness. All eyes are on the Fed and Jerome Powell as markets hold their breath for Wednesday.
What to Watch Today…
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GBP ⇑
Pound Sterling gained roughly half a percent against the Buck overnight as global financial jitters persisted. Investors began to see the UK economy as a relatively safe bet when comparing it to the recent collapses of regional banks inside the US and looking at the resilience the region has shown in recent data releases. After the Fed meets on Wednesday, the Bank of England releases its latest policy decision Thursday and current bets show more likelihood of hiking 25 basis points versus holding.
JPY ⇑
The Japanese Yen once again finds itself as a winner on the G10 board as investors continue to flock to the traditional safe haven currency amidst global financial sector instability. The Bank of Japan’s steady hand has outweighed fears over Japan’s lackluster economic growth and aging population as risk aversion becomes king. Even as the incoming governor of the BoJ Kazuo Ueda’s term begins, the central bank continues to signal caution, easing speculation of any big policy shift.
