USD appreciated against most of its major rivals in the European session on Monday as investors digested reports about a collapse of the U.S. First Republic Bank while awaiting an announcement of the Federal Reserve’s decision on interest rates on Wednesday.
Earlier today, the media reported about the purchase of the bulk of assets of struggling First Republic Bank by JPMorgan Chase. The takeover, orchestrated by U.S. regulators, marked the third failure of a regional bank in the U.S. since the collapses of Silicon Valley Bank and Signature Bank in March.
The latest data, including Friday’s PCE price index release, support the case for the Fed to raise interest rates one more time at its two-day meeting, the outcomes of which are to be announced on Wednesday.
According to CME FedWatch Tool, markets price in an 86.3% probability of another 25-basis-point rate hike this week - the move which will lift the rates to 5.00-5.25% and is seen to end the Fed's current tightening cycle.
The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, increased by 0.16% to 101.82.