- USD/JPY is attempting to come up for air at the start of the week.
- There is a jittey mood in markets due to the banking crisis.
USD/JPY is up 0.1% on the day and has traveled between 130.49 and 131.05 so far while the mood remains jittery after shares in Deutsche Bank fell 8.5% on Friday. Investors are depending on the authorities to ring-fence the banking sector while depositors have already been fleeing smaller banks as seen in the flows to money market funds.
Banking stocks plunged in Europe with heavyweights Deutsche Bank and UBS Group pummelled by concerns that we are seeing the worst implications for financial markets since 2008 financial crisis. Consequently, the US Dollar, DXY, rose by over 0.5% to 103.35. Nevertheless, the safe-haven Japanese yen touched a seven-week low of 129.65 last week.
Elsewhere, Minneapolis Fed President Neel Kashkari on Sunday said officials were watching "very, very closely" to see if the banking stress led to a credit crunch that threatened to tip the economy into recession. Meanwhile, markets are well ahead of the central bank in pricing around an 80% chance rates have already peaked. In fact, a pivot is being priced in and the first rate cut is seen as early as July.
In this regard, the US PCE price inflation data will be key and it is expected to slow down from a robust 0.6% MoM in Jan to a still-strong 0.4% in February (also below core CPI's 0.5% MoM gain), as analysts at TD Securities said.
´´ The YoY rate likely rose a tenth to 4.8%, suggesting the path to normalization in price gains will be bumpy. Conversely, personal spending likely fell, but that would follow an eye-popping 1.8% surge in the prior month.´´
As for Fed speakers, we will have the Fed´s Governor Philip Jefferson later on Monday, while Fed Vice Chair for Supervision Michael Barr testifies on "Bank Oversight" before the Senate on Tuesday.