Foreign exchange markets started the week out not with a bang but with a whimper, as many major nations around the world are closed for the May Day labor holiday.
Overview
Price action over the weekend was muted across the G10, but the biggest news came out of the US early this morning. Overnight, struggling bank First Republic was seized by the Federal Deposit Insurance Coalition and sold to JP Morgan Chase for the paltry sum of $10.6 billion.Though this seizure and sale were not necessarily a surprise, it still marks the second-largest bank failure in history. First Republic clients withdrew more than $100 billion in deposits since the March 10 failure of Silicon Valley Bank, and pressure continued to mount even after JP Morgan and other large banks injected $30 billion into the lender last month. As of Friday’s close, shares of First Republic had lost 97% from the beginning of March.
Even with the news of this buyout, First Republic’s failure continues to pressure the Federal Reserve, raising questions about the continued stability of the US financial system ahead of this week’s meeting. Currently, markets expect one final rate hike of 25 basis points this week and a pause beginning in June, with the potential for cuts later this year.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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JPY ⇓
Japanese Yen continued to take losses against the Buck from Friday through the weekend as markets further digested the Bank of Japan’s decision to keep its policy path unchanged. Investors are pushing back bets on if and when the BoJ will start to tweak its policy, limiting the upside for the Yen until the Federal Reserve ends this tightening cycle.
AUD⇑
The Australian Dollar posted a surprising gain against USD overnight ahead of the Reserve Bank of Australia’s meeting Tuesday, rising more than half a percent since Friday’s close. The RBA is widely expected to continue its rate-hike pause following a slowdown in inflation inside the nation as Governor Philip Lowe said he is willing to tolerate a slower return of inflation to target rates in order to steer Australia toward the mythical “soft-landing scenario.”
