Interbank Market News Scan: Inflation at 6% and the dollar index takes a hit.

Bankers came to the King and said, “We can help spread your influence and power by distributing your currency; by helping to coin the energy extracted from your subjects while validating these actions by funding your political economy. All we ask in return is to earn a spread on the loans, currency, and currency-denominated products that we sell.”

And the King said, “Done.”

Yesterday, President Joe Biden made it clear that investors in Silicon Valley Bank would not be bailed out by the federal government, although all of the bank’s depositors would be made whole. As banks are at the core of the political economy and given the spread of the news throughout media, Mr Biden’s attempts to assure Americans that their deposits are safe is to be expected. But what of his assurance to the markets?

Around 4:10 pm on 10 March 2023, MarketWatch reported the dollar index at 104.63. As of 8:46 am, 14 March 2023, the dollar index was at 103.85, a fall of .007%.

Reviewing data from OANDA, the respective broker spreads for the dollar when compared against the British pound, the euro, and the Canadian dollar remained the same between 10 March 2023 and 14 March 2023. The spreads widened, however, for the dollar against the Mexican peso and the Japanese yen.

I don’t pretend to be a currency strategist but so far it does not appear that Mr Biden has to be too concerned today about volatility in the interbank market.

Nor does he have to be too concerned today about inflation. According to data from the U.S. Bureau of Labor Statistics, the year-over-year consumer price index increased by six percent with consumer prices climbing 0.4% during the month of February. Prices are still increasing, but I expect Mr Biden to claim a victory in the fight against rising prices by taking note of the slow-down in the rate of change.

I would counsel the “king” by reminding him of his duty to the markets. Future actions should keep in mind that there is a promise to the banks/brokers that their spreads will be protected.

Alton Drew

14 March 2023

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Disclaimer: The data and output from this blog post does not constitute investment or legal advice and is not a personal recommendation from Alton Drew.  Nothing contained herein constitutes the solicitation of the purchase or sale of any futures or options.  Any investment activities undertaken will be at the sole risk of the reader.  Alton Drew expressly disclaims all liability for the use or interpretation (whether by visitor or by others) of information contained herein. Decisions based on this information are the sole responsibility of the reader.  Any visitor to this page agrees to hold Alton Drew harmless against any claims for damages arising from any decisions that the visitor makes based on such information.