USD

Despite the announcement yesterday afternoon (Sunday) that UBS is to acquire Credit Suisse (CS) for a reported $3.2b, jitters, nervousness, and high volatility continue to reverberate around markets this morning. The structure of the deal has been fundamental to the latest bout of market anxiety, with concern over the Swiss authorities writing down bondholders holding roughly $17bn of CS debt. UBS shares also declined heavily on the open but have since pared losses, although contagion risk remains elevated. With the FOMC set to announce their latest rate decision in the middle of the week, much uncertainty around what the Fed ultimately does remains. The dollar remains under pressure, with the dollar index (DXY) slipping around 1% today. 

EUR

EU authorities have been quick to express concerns over the Swiss wipe-out of CS bondholders, issuing a joint statement from the ECB, Single Resolution Board, and the European Banking Authority, indicating that they disagree with the approach by the SNB and regulators in Switzerland. That move helped to ensure that European bank stocks pared their losses from the open. This morning, the single currency is also probing higher, with EUR/USD around 0.5% higher. 

GBP

The pound remains supported given the pressures elsewhere, and GBP/USD is now trading up at levels not witnessed since the beginning of this year, rising by around 0.5% on the session. Given the fluid situation in global banking stocks, with is having a significant impact on broader market risk appetite, quite what the BoE will do at their next rate meeting later this week remains highly uncertain. Thursday seems like an eternity away.  

JPY

Amongst currencies, the Yen remains a solid safe haven for nervous flows, which has been clearly evidenced recently, as USD/JPY has declined by around 5% over the past fortnight. EUR/JPY is around 3% lower. Clearly, the sustainability of the ongoing Yen rally will be driven by risk appetite, as opposed to any likely changes made from within the BoJ, given that as a consequence of a big rally in global bond prices, the yield on the 10-year JGB remains way, way, way below the BoJ’s 0.5% ceiling. 

CAD

On paper, it should be a big week for Canadian economic data, with the latest Inflation and Retail Sales data due for release. The latest estimates predict that Inflation will continue to soften. However, events outside Canada will likely ensure that data takes a back seat through this week. In the meantime, the Loonie remains fairly well supported, with USD/CAD slipping by around 0.25% this morning, despite another dip in global commodity prices. 

MXN

The Peso started the new week under fairly heavy selling pressure, given the broad migration from risky to safer assets, which has benefitted the likes of the Yen (see JPY), but not so much the Swissy this time, given the CS takeover. The latest bout of risk aversion had seen USD/MXN rally by around 0.5% during the Asian and European morning sessions, but the Peso is clawing back some of the losses as we go to print, given some signs of calming after initial market jitters.

BRL

Having rallied by over 1% at the end of last week, the Real gave up around half of the move through Friday. With downside pressures on emerging market currencies waning somewhat after a tough start earlier this morning (see USD/MXN), it remains to be seen if the Real can make headway once the USD/BRL market opens today.