US Dollar Slides Below Critical Support Amid Tougher Capital Requirements and Cautious Market Sentiment
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US dollar slides below critical support.
The week started on a cautious note as European and US stocks eked out small gains, but appetite was limited appetite on news that the new capital requirements for the US banks would be tougher.
And mega caps didn't give much support. Tesla lost up to 2% during the session, while Amazon closed the session more than 2% lower before its Prime Day – which now became an industrywide shopping day and will give us a hint on how much US consumers are ready to up their spending online. Meta, on the other hand, advanced 1.23%, as Threads already amassed 100 mio users since its launch last week, while internet traffic data from Cloudflare showed that Twitter use 'tanked'.
Tougher rules
Michael Barr said yesterday that he will recommend tougher capital rules for banks with $100 billion or more in assets, as opposed to those that have $700bn and more so far concerned with the tough rules.
More importantly, unrealized losses (and gains) on security portfolios will be considered when calculating regulatory proposal, a thing that could've helped avoiding Silicon Valley Bank's (SVB) collapse, but that will also put a bigger pressure on banks that bought tons of US treasuries and that are now sitting on significantly discounted portfolios.
The good news is that big banks like JP Morgan and Citi didn't react aggressively to the news, and even more reassuring news is that the smaller, regional bank stocks tempered the news quite well as well. Pacwest for example lost only around 1% and Invesco's KBW index even closed the session slightly higher.
What's less reassuring, however, is the fact that the Federal Reserve (Fed) will continue pushing the interest rates higher, and that will put an extra pressure on lenders, and the regional lenders are the most vulnerable to rate changes.
By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank
