The US Dollar Index (DXY) witnessed a sheer sell-off on Tuesday as United States banking jitters eased after the announcement of the acquisition of collapsed Silicon Valley Bank’s (SVB) deposits and loans by First Citizens BancShares. Apart from that, improvement in market sentiment in hopes that the Federal Reserve (Fed) won’t be required more strengthening of monetary tools to continue to weigh on US Inflation.
US banking shakedown by the collapse of three mid-size banks is forcing banks to remain more precautionary while disbursing advances to businesses and households. The debacle of US banks has resulted in the withdrawal of deposits by households amid the absence of wider blanket insurance on all deposits and dents confidence. This would lead to a decline in advances by small US banks or they may be required to tighten credit conditions further to avoid further casualties.
Therefore, Fed chair Jerome Powell won’t be required to go heavy on interest rates as fewer advances would weigh heavily on persistent inflation in the US economy.
Going forward, the release of the core Personal Consumption Expenditure (PCE) (Q4) data will remain in the spotlight. The economic data is expected to remain steady at 4.3%.
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