Daily Market Pulse

Will $30b be enough to save First Republic?


The announcement yesterday evening that a total of 11 key US banks have banded together to deposit $30bn with First Republic Bank in a bid to shore up the bank’s balance sheet, has once again helped to stabilize what has been a particularly nervous market this week. Despite this, there still remains much uncertainty among markets. In any average week, the release of today’s Michigan Consumer Sentiment and 5-year inflation expectations would have a significant impact on risk appetite, but data has played second fiddle to the banking crisis this week, and that could continue through today. The dollar has edged lower overall over the past day, with the dollar index (DXY) moving around 0.5% lower. 



The ECB stuck to their guns and raised Euro area rates by another 50bps yesterday, taking the key policy rate to 3% in the process. The vote was not unanimous, with ‘several’ ECB members voting for a pause, given the vents of this week. However, the ECB has removed the line in their accompanying statement that implies that the ECB will ‘keep rising rates at a steady pace’, given they understandably need to see whether there has been a broader negative impact on global economic growth. EUR/USD is up around 0.5% over the past two days.



More robust growth, lower unemployment, and better public finances. Who would have thought we could be making those statements around the UK economy just a couple of months ago? With the ‘friendly’ UK Budget also helping to underpin the pond, the sterling has had a solid week. GBP/USD has rallied over 0.5% in the past two days, with GBP/EUR also maintaining the recent gains, a move that most major sterling crosses have mirrored. 



Having moved over 1% each day of this week, USD/JPY finally settled a touch yesterday, with the pair rallying less than 0.5% amidst the broader dollar rally. However, the slower backdrop today, with a slight risk of bias, is seeing the pair moving steadily lower. The bigger picture is still one of gradual Yen gains, with the pair down roughly 3% from the early March high.



With Oil moving steadily lower throughout this week, driven by expected demand reductions and increased supply-side worries, one might have expected to have seen a weaker Loonie. However, USD/CAD remains within 40pips of Monday’s open, highlighting the rangebound backdrop, despite much volatility amongst major currency pairs elsewhere. Following Tuesday’s Canadian inflation report has the potential to have a much more significant impact on the pair, with expected softness amongst inflation further highlighting the BoC’s recent decision to pause rate hikes.   



As markets settled through yesterday, the calmer environment helped to unwind some of the recent gains in USD/MXN as the pair dropped by around 1.2% from the high. That trend has continued overnight through Asia and the European morning, with USD/MXN slipping by a further 0.5%. Considering that, the Peso remains roughly 3.6% lower than this time last week. 



The Real has mirrored the moves in USD/MXN and that of the broader Emerging Market universe this week and has slipped by over 1% since reaching a high not seen since early January. Looking ahead, the Real will likely remain dominated by broader market sentiment but is expected to gain traction once market nerves settle. 




The latest data in China has confirmed that the post-COVID era has got off to a shaky start, with Retail Sales matching estimates and Industrial Production missing targets. Unemployment (in Cities) increased to 5.6% during February, although youth unemployment remains at over 18%. USD/CNH is down by around 0.5% so far today. 


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