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☆ Dollar slides on likely rate pause in wake of SVB collapse
▼ + stars: | 2023-03-13 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

Investor focus will now be on Tuesday's inflation data to gauge how hawkish the Fed is likely to be. "Given what's happened in the U.S. financial system, a 25 basis point hike is more likely than a 50 basis point hike." The market is now pricing a nearly 18% chance of the Fed sticking to its current rate and an 82% chance of a 25 basis point hike. In contrast, the market was pricing a 70% chance of a 50 basis point hike before the SVB collapse. Meanwhile, the Japanese yen strengthened 0.61% versus the U.S. dollar to 134.18 per dollar, having touched a one-month high of 133.58 earlier in the session.

WASHINGTON/SINGAPORE, March 13 (Reuters) - U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank (SIVB.O) threatened to trigger a broader financial crisis. Silicon Valley Bank (SVB), a mainstay for the startup economy, was a product of the decades-long era of cheap money, with unique risks that made it especially vulnerable. With the Fed poised to continue raising interest rates, investors said the financial system may not be fully out of the woods just yet. Goldman Sachs' analysts said they no longer expect it to raise rates at that meeting, amid the stress in the banking sector. A senior U.S. Treasury official said the actions taken would protect depositors, while providing additional support to the broader banking system, but officials and regulators were continuing to monitor financial system stability.

☆ Dollar sinks as US intervenes on SVB collapse
▼ + stars: | 2023-03-13 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

It had previously expected a 25 basis point hike. The SVB collapse led investors to speculate that the Fed would now hesitate to hike interest rates by a super-sized 50 basis points this month. "Given what's happened in the U.S. financial system, a 25 basis point hike is more likely than a 50 basis point hike." In contrast, the market was pricing a 70% chance of a 50 basis point hike before the SVB collapse. The Australian dollar surged 1.41% to $0.667, and was on track for its biggest one-day percentage jump since Jan. 6.

☆ VIEW US intervenes to shore up SVB deposits, stem financial fallout
▼ + stars: | 2023-03-13 | by ( ) www.reuters.com time to read: +10 min

March 13 (Reuters) - The U.S. government announced actions to shore up deposits and stem any broader financial fallout from the sudden collapse of tech startup-focused lender Silicon Valley Bank (SIVB.O) (SVB), sending U.S. stock futures higher. "The market turbulence sparked by SVB has upended rising market expectations on the Fed rate path. The fact that SVB and Signature Bank depositors will be made whole is critical in maintaining trust in the financial system and should help stem contagion fears this week. But it also means that 50 basis points (a possible Fed interest rate hike) is off the table." Given what's happened in the U.S. financial system, a 25 basis point hike is more likely than a 50 basis point hike."

☆ Instant view: US intervenes to shore up SVB deposits, limit financial fallout
▼ + stars: | 2023-03-13 | by ( ) www.reuters.com time to read: +11 min

March 13 (Reuters) - The U.S. government announced actions to shore up deposits and stem any broader financial fallout from the sudden collapse of tech startup-focused lender Silicon Valley Bank (SIVB.O) (SVB), sending U.S. stock futures higher. ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBC CAPITAL MARKETS, SINGAPORE:"Markets remain unsettled from the SVB failure. "The market turbulence sparked by SVB has upended rising market expectations on the Fed rate path. ANTHONY SAGLIMBENE, CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN:"It was imperative that regulators stepped in and decisively acted before markets around the world opened for the week. GREG MCBRIDE, CHIEF FINANCIAL ANALYST, BANKRATE:"While the Fed has talked about a lot in the past year, until today it has been in the context of monetary policy.

WASHINGTON (Reuters) - The U.S. administration stepped in on Sunday with a series of emergency measures to shore up confidence in the banking system after the failure of Silicon Valley Bank threatened to trigger a broader systemic crisis. “The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden said in a statement. Silicon Valley Bank (SVB), a mainstay for the startup economy, was a product of the decades-long era of cheap money, with unique risks that made it especially vulnerable. With the Fed poised to continue raising interest rates, investors said the financial system may not be fully out of the woods just yet. “Going forward, we will work with Congress and the financial regulators to consider additional actions we could take in the future to strengthen the financial system,” the official said.

[1/2] European Central Bank and SVB (Silicon Valley Bank) logos are seen in this illustration taken March 10, 2023. SVB, which does business as Silicon Valley Bank, was not immediately available for comment. "Silicon Valley Bank is shedding light on vulnerabilities across the US banking sector, primarily in the bond holdings that many large institutions hold," said Karl Schamotta, Chief Market Strategist at Corpay. “The current liquidity run on Silicon Valley Bank is having a knock-on effect on the wider banking system," said Rick Seehra, Prudential Lead at Bovill. But banking experts said SVB's issues were unique and the worries about the broader sector were not warranted.

The greenback briefly cut its losses after data showed the U.S. services sector grew at a steady pace in February, with new orders and employment rising to more than one-year highs. "This suggests traders think yields have been pushed too far, too fast, and could augur a peak in implied terminal rates," he added. "Next week's job opening and non-farm payrolls reports could generate a lift in yields and the dollar. The dollar eased 0.4% to 136.26 yen , after climbing to 137.10 on Thursday, the highest since Dec. 20. For the week, the dollar is down 0.4% versus the yen, but any gain would preserve its win streak since mid-January.

Investors will be looking for Powell's take on the labor market in a speech at the Economic Club of Washington due later in the day, after a sharp rise in jobs growth last week punctured hopes for a tempered Fed. "We expect Chair Powell to emphasize stubbornness in underlying inflation pressures while highlighting the labor market’s strength and capacity to withstand higher rates." U.S. interest-rate futures show that markets are expecting the Fed funds rate to peak just above 5.1% by June, compared with expectations of a peak below 5% prior to Friday's jobs report. "The Fed still has some progress to make, there are signs of positivity in terms of the disinflationary pressures that are in the pipeline, but there is still a labor market problem." Sterling was last 0.4% down against the dollar at $1.1982, after tumbling to a one-month low of $1.1974 in the previous session.

That prompted the central bank to pause its most aggressive tightening cycle for now, becoming the first major central bank to do so. Traders have already bid up Canadian stocks and the Canadian dollar , dubbed a 'commodity currency', since the news of China reopening surfaced in December. Doug Porter, chief economist at BMO Capital Markets, said that for Canada, China's reopening is more a "clear-cut positive" than it would be for other countries with fewer commodities exports. The U.S. Federal Reserve, the European Central Bank and the Bank of England have since laid the groundwork for a pause as well. Karl Schamotta, chief market strategist at Corpay said China's reopening will help put a floor under global price levels, potentially offsetting demand destruction as economies slow.

☆ Dollar eases as traders look to central banks for cues
▼ + stars: | 2023-01-25 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +4 min

REUTERS/Dado Ruvic/IllustrationNEW YORK, Jan 25 (Reuters) - The dollar slipped against the euro on Wednesday, but its losses were capped as traders were hesitant to make any big bets ahead of next week's central bank meetings, including the Federal Reserve and the European Central Bank. "Trading ranges remain remarkably compressed ahead of next week's central bank meetings," said Karl Schamotta, chief market strategist at Corpay. Data on Tuesday showed euro zone business activity made a surprise return to modest growth in January. In contrast, U.S. business activity contracted for the seventh straight month in January, data showed on Tuesday, though the downturn moderated across manufacturing and services for the first time since September. The dollar was down 0.42% against the yen , at 129.615 yen per dollar, having hit a near eight-month low of 127.215 on Jan. 16.

☆ Dollar edges down as traders look to central banks for cues
▼ + stars: | 2023-01-25 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +4 min

REUTERS/Dado Ruvic/IllustrationNEW YORK, Jan 25 (Reuters) - The dollar edged down against the euro on Wednesday in subdued trading as investors were hesitant to make any big bets ahead of next week's central bank meetings, including the Federal Reserve and the European Central Bank. "Trading ranges remain remarkably compressed ahead of next week's central bank meetings," said Karl Schamotta, chief market strategist at Corpay. Data on Tuesday showed euro zone business activity made a surprise return to modest growth in January. Expectations of further rate increases by the European Central Bank have also supported the euro. In contrast, U.S. business activity contracted for the seventh-straight month in January, data showed on Tuesday, though the downturn moderated across manufacturing and services for the first time since September.

☆ U.S. dollar down, still set for best year since 2015
▼ + stars: | 2022-12-30 | by ( Hannah Lang | ) www.reuters.com time to read: +3 min

As 2022 draws to a close, the dollar was set to notch a 7.9% annual gain against a basket of currencies - its biggest annual jump in seven years. "If it's weak growth, the U.S. dollar will fall. The British pound was last up 0.09% at $1.2063, on pace for a 10.8% annual drop . The Australian dollar, seen as a liquid proxy for risk appetite, was up 0.41% on the day at $0.681 , but set to drop 6.4% on the year overall. The Bank of Japan's ultra-dovish stance has the dollar set to gain 13.7% versus the yen this year, in the yen's worst performance since 2013.

☆ U.S. dollar gains as risk tolerance drops with hawkish central banks
▼ + stars: | 2022-12-16 | by ( ) www.cnbc.com time to read: +3 min

The dollar rose on Friday in choppy trading, extending sharp gains in the previous session as risk appetite soured, as investors grappled with the prospect that borrowing costs still have a long way to climb. New York Fed President John Williams upped the hawkish rhetoric on Friday, saying it remains possible the U.S. central bank raises interest rates more than it currently expects next year. That said, financial markets do not seem to be buying the hawkish Fed stance. The dollar index, which gauges the currency against six major peers, rose 0.2% to 104.69, after rallying more than 0.9% on Thursday. The index has surged around 9% this year as the Fed has hiked interest rates hard, sucking money back towards dollar-denominated bonds.

The fed funds rate currently stands in the 4.25%-4.50% range. Plenty of investors believe the Fed will stick to its guns, even if the economy wobbles. The Fed's economic projections showed rates dropping to 4.1% in 2024, higher than estimated three months ago. She is expecting the gyrations that rocked bonds this year to continue, driven in part by investors second-guessing the Fed's commitment to keeping monetary policy tight. "We have a generation of traders that has never seen the Fed not bail it out when push comes to shove."

He described the slow rate of economic growth penciled in by Fed officials next year as still "modest." Only two of 19 Fed officials see the benchmark overnight interest rate staying below 5% next year, a sign of a still broad consensus to lean against inflation. In the U.S. Treasury market, which plays a key role in the transmission of Fed policy decisions into the real economy, yields were little changed to slightly lower. Powell said the speed of coming rate rises is less critical now than earlier in the year when the central bank was "front-loading" rate hikes to catch up with accelerating prices. "Our focus right now is really on moving our policy stance to one that is restrictive enough to ensure a return of inflation to our 2% goal over time, it's not on rate cuts," Powell said.

☆ Fed hikes rates by 50 bp, as expected, keeps hawkish tone
▼ + stars: | 2022-12-14 | by ( Reuters Staff | ) www.reuters.com time to read: +8 min

STORY: STATEMENT TEXT:MARKET REACTION:STOCKS: The S&P 500 turned sharply lower then steadied down 0.11%BONDS: Benchmark 10-year note yields rose then backed off to 3.4847%. CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE“The Fed is taking away the punchbowl just as the party was getting started. They’re reiterating their forecasts but the whisper number was that the Fed was going to stop at a 4.5%-4.75% terminal rate. You know, the biggest thing that is holding the Fed back right now are the jobs numbers. The most dovish participants is looking for an extra 50 bps of hikes.

[1/3] Federal Reserve Board Chairman Jerome Powell speaks during a news conference following the announcement that the Federal Reserve raised interest rates by half a percentage point, at the Federal Reserve Building in Washington, U.S., December 14, 2022. The Fed's policy rate, which began the year at the near-zero level, is now in a target range of 4.25% to 4.50%, the highest since late 2007. In the U.S. Treasury market, which plays a key role in the transmission of Fed policy decisions into the real economy, yields were little changed. "It's not as important how fast we go," Powell said, noting the bigger question facing policymakers is where the endpoint of the Fed rate hikes is and how long it stays at that level. Any debate over easing rates would only happen when officials are confident inflation is moving down, he said.

☆ Instant view: Fed hikes rates by 50 bp, as expected, keeps hawkish tone
▼ + stars: | 2022-12-14 | by ( ) www.reuters.com time to read: +8 min

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE“The Fed is taking away the punchbowl just as the party was getting started. They're reiterating their forecasts but the whisper number was that the Fed was going to stop at a 4.5%-4.75% terminal rate. "But the Fed is out there saying that 5.1% is still on the cards … and that rate hikes will continue." BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN“The most interesting part of the releases were in the Summary of Economic Projections. And they’re holding it there longer than markets expected.”“In addition, they’re downgrading GDP estimates for this year, and in particular, for next year.

☆ Canada's deep yield curve inversion adds to BoC rate hike dilemma
▼ + stars: | 2022-12-04 | by ( Fergal Smith | ) www.reuters.com time to read: +4 min

Canada's central bank says that the economy needs to slow from overheated levels in order to ease inflation. The yield on the Canadian 10-year government bond has fallen nearly 100 basis points below the 2-year yield, marking the biggest inversion of Canada's yield curve in Refinitiv data going back to 1994 and deeper than the U.S. Treasury yield curve inversion. The depth of Canada's curve inversion is signaling a "bad recession" not a mild one, said David Rosenberg, chief economist & strategist at Rosenberg Research. Still, 3-month measures of underlying inflation that are closely watched by the BoC - CPI-median and CPI-trim - show price pressures easing. "The yield curve would not invert to this extent unless investors also believed that inflation will drop back down toward the Bank's target," said Brown.

Before the U.S. data the euro, sterling and the Swedish crown had already risen sharply against the U.S. dollar as traders assessed a slew of economic data, including UK and euro zone job figures plus German economic sentiment. In Europe traders were also eying encouraging data such as German economic sentiment ZEW index, which rose in November. Jane Foley, head of FX strategy at Rabobank in London also pointed to other headlines supporting risk currencies against the dollar. The dollar index , which measures the currency against six counterparts including sterling and euro, was last down 0.46% at 106.162 after earlier touching 105.34, its lowest point since August. The Swedish crown rose sharply against the U.S. dollar after data showed inflation in Sweden rose less than expected in October.

☆ Stocks mixed, yields ease; investors weigh chance of rate hike slowdown
▼ + stars: | 2022-11-01 | by ( Caroline Valetkevitch | ) www.reuters.com time to read: +3 min

[1/3] Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 17, 2022. Still, investors were also digesting Tuesday's data showing U.S. job openings unexpectedly rose in September, suggesting that demand for labor remains strong despite the Fed's recent rate hikes. The pan-European STOXX 600 index (.STOXX) rose 0.50% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) gained 0.07%. In the currency market, the dollar index , which measures the U.S. currency against six rivals, was last little changed. U.S. crude recently rose 2.09% to $88.34 per barrel and Brent was at $94.59, up 1.92% on the day.

☆ Analysis: Loonie bulls reel as Bank of Canada trails Fed on terminal rate bets
▼ + stars: | 2022-09-27 | by ( Fergal Smith | ) www.reuters.com time to read: +4 min

A Canadian dollar coin, commonly called a "loonie," and an American dollar bill are seen in this staged photo in Toronto, March 17, 2010. ,A lower terminal rate for the BoC than the Fed is not uncommon, but it threatens to pour cold water on Canadian dollar bulls' expectations that interest rate differentials would help underpin the currency over the coming year. The Canadian dollar has weakened 7.5% against the greenback since the start of the year. Canada's housing market has slowed rapidly in recent months, while its share of the economy, at 9%, is nearly twice that of the U.S. housing market. "Canada's economy is simply more interest rate sensitive than the U.S. economy," said Royce Mendes, managing director and head of macro strategy at Desjardins.

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