USD Turning Bullish Today As Banking Jitters Return

The US dollar turned bearish yesterday, slipping lower as risk sentiment remained mildly positive, but today we have seen a reversal and the USD is making some decent progress on brewing risk aversion. Today’s trade is looking like a classic flight to safety as Treasury yields fall around 12 bps across the Treasury curve. Normally falling yields weigh on the US dollar (as they did yesterday) but today it’s the opposite. That underscores a market that’s skittish about banks and the broader economy.

According to the earnings report, First Republic Bank experienced significant deposit outflows during the March market downturn. Of the $176 billion in deposits, $100 billion were withdrawn by customers. However, in an emergency effort led by larger US banks, $30 billion in deposits were added back but that hasn’t improved the sentiment.

Despite the significant deposit outflows, shares of First Republic Bank rallied due to a short squeeze yesterday, with investors believing that only $60 billion in deposits had been lost. However, today we saw a bearish gap at the US open, with FRB shares being around down 25% to $11.80s, which is likely to negatively impact regional banks and S&P 500 futures.

This week is a big one for earnings, and other companies that have reported their earnings include:

• GM +1.7%
• McDonalds +0.8%
• UPS -5.6%
• Coca-Cola +0.1%
• PepsiCo +1.7%
• PKG -6.8%
• Whirlpool +3.0%
• Cleveland-Cliffs -2.3%

Comments on diminishing inflationary pressures from Coca-Cola and McDonald’s were constructive on the macro view but haven’t helped market sentiment, even with Treasury yields down 10 bps at the front end. Most forex pairs are down against the USD, which is pushing higher. Gold also tumbled around $20 lower in the European session, but it jumped at the start of the US session. We decided to open a buy Gold signal a while ago, as XAU/USD seems to have found support at the 50 SMA (yellow) on the H1 chart.

GOLD