US Dollar Index struggles to cheer SVB, Signature Bank news ahead of US inflation

• US Dollar Index picks up bids to consolidate US employment-led losses.
• US regulators take measures to tame risks emanating from SVB, Signature Bank.
• Fed blackout period may test DXY bulls as firmer sentiment weigh on US Dollar’s haven demand.
• US CPI, Retail Sales will be important to watch for clear directions.

US Dollar Index (DXY) licks its wounds while paring the intraday loss to 104.30 during early Monday, following the two-day losing streak at the latest. In doing so, the US Dollar’s gauge versus the six major currencies portrays the market’s rush towards riskier assets like AUD/USD and commodities amid easing fears from the Silicon Valley Bank (SVB) and Signature Bank.

During the weekend, US Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) took joint actions to tame the risks emanating from the SVB and Signature Bank. “All depositors of Silicon Valley Bank and Signature Bank will be fully protected,” said the authorities in a joint statement released a few minutes back. S&P 500 Futures and US Treasury bond yields consolidate the previous day’s losses after the late plan for the US authorities to tame the financial crisis.

Also read: Regulators close Signature bank, announce plan to make depositors whole

While easing fears from the SVB and Signature Bank appear to weigh on the US Dollar of late, following the drowning of the US Treasury bond yields on Friday, the DXY may witness a corrective bounce as the latest US jobs report appeared somewhat upbeat.

On Friday, United States Nonfarm Payrolls (NFP) grew more than 205K expected to 311K in February, versus 504K (revised), while the Unemployment Rate rose to 3.6% for the said month compared to 3.4% expected and prior. Further, the Average Hourly Earnings rose on YoY but eased on monthly basis for February whereas the Labor Force Participation increased during the stated month.

It should be noted, however, that the Federal Reserve (Fed) officials’ two-week silence ahead of the monetary policy meeting may probe the DXY bulls if the risk-on mood lasts longer. Also important to watch will be the US Consumer Price Index (CPI) for February, up for publishing on Tuesday, which will precede the Retail Sales and preliminary readings of the Michigan Consumer Sentiment Index for March, up for publishing on Wednesday and Friday.

Technical analysis

A daily closing below the 50-day Exponential Moving Average (EMA), around 104.20 at the latest, becomes necessary for the US Dollar Index (DXY) bears to retake control.