Despite the announcement that UBS is to acquire Credit Suisse for a reported $3.2b jitters, nervousness, and high volatility continue to reverberate around markets this morning.

There has been a calmer and more positive backdrop to markets over the past 24 hours, with bank stocks probing higher.

Market-implied probability favors a 25bps hike as we near a likely terminal rate (sufficiently restrictive), but you would be wise not to put your house on it.

Ongoing dollar weakness has continued without disruption throughout this week. The dollar index is now around 0.7% lower.

The latest US PCE price index, released on Friday, followed a familiar pattern among recent global inflation updates. Annual headline inflation dipped to 5% (from 5.3%).

The USD surged to an 11-week high yesterday after a robust retail sales report led investors to reduce bets on Fed rate cuts this year.

While markets may be watching for risks approaching the banking sector in the rearview mirror, this week also continues with fresh attempts to look forward

Donald Trump is set to be inaugurated as the 47th President of the United States. Republicans secure Senate control, markets react with significant gains, and global currencies fluctuate post-election.

Ultimately, the Fed delivered broadly in line with market expectations yesterday afternoon, raising US rates by 25bps to a target range of 4.75 – 5%.

The U.S. dollar continues to assert its dominance this morning, gaining strength against the euro and sterling while showing slight weakness against the Canadian dollar.