Yesterday, the euro quickly regained its position against the US dollar alongside the pound sterling. Optimism about the end of the banking crisis in the US and interest rates hitting their peak continues to prevail in the market, as it should be followed by a period of monetary policy easing.
Regarding the banking sector, there were many discussions last week. American politicians repeatedly expressed their thoughts on this matter. However, judging by what is happening, they seem to want to put the blame for the recent troubles on the President of the Federal Reserve Bank of San Francisco, Mary Daly. The second-largest bank bankruptcy in US history occurred in her district.
According to government officials, regional Fed presidents, specifically Mary Daly, should have been more involved in monitoring their largest banks. However, it should be noted that key policy and enforcement decisions are made in Washington DC, and not by Daly, and it is difficult to say who else is really responsible for this crisis, apart from the bank managers themselves.
Daly and representatives of the Federal Reserve Board of Directors declined to comment on this report.
Banking experts also note that auditors of large banks working in regional branches are indeed hired by presidents of regional banks and can be fired by them as well. However, most of their auditing is controlled and reviewed by the Board of Directors in Washington, D.C.
Earlier, the bankruptcy of SVB in early March sent shockwaves through the banking industry, triggering fears about the massive withdrawal of funds from medium and small banks. As data showed, at the moment, hundreds of billions of dollars have flowed from smaller banks to larger ones, and hundreds of billions more dollars have left the banking system altogether and ended up in money market mutual funds.
This raised serious questions about the Federal Reserve's banking supervision and its inability to act more decisively on previously identified issues. During last week's hearings in the House of Representatives and the Senate, Republican congressmen accused Daly and the FRB of San Francisco of focusing too much on the wrong things. According to the Republican senator from Tennessee Bill Hagerty, the San Francisco Fed was too busy studying policies in which they had absolutely no experience, while ignoring one of the most basic risks in banking-interest rate risks.
However, since that the turmoil in the US banking sector has not spread to other continents, and the crisis is gradually subsiding, the demand for riskier assets, such as the euro and the pound sterling, is increasing once again.
As for the technical picture of EUR/USD, bulls still have every chance to continue the upside movement and hit the March highs once again. To do this, the pair should stay above 1.0880, which will allow it to break out of the 1.0930 range. From this level, EUR/USD could increase to 1.0970, from which it could reach 1.1005 later on. If the trading instrument declines, major bullish traders would only become active around 1.0880. If they are idle on this level, the best course of action is to wait for the pair to hit the low at 1.0840 or open long positions around 1.0790.
As for the technical picture of GBP/USD, bulls have regained control of the market, but it is still too early to talk about the resumption of the upward trend. To maintain the initiative, buyers need to stay above 1.2385, and also break out of the 1.2440 range. Only breaking above this level will make recovery to 1.2500 more likely. Afterwards, the pair could make a sharper upward move towards 1.2550. If GBP/USD declines, the bears will try to take over 1.2380. If they manage to do this, breaking below this level will negatively impact the positions of bulls positions, pushing GBP/USD to a low of 1.2335, with the prospect of reaching 1.2275.