The Second Domino To Fall

First Republic Bank: The Second Domino To Fall

• First Republic Bank lost 97% market cap
• Had a $30b bailout from JPM a month ago
• Deposits dropped 41% in Q1
• The 16th largest US bank goes under

First Republic auction underway, with deal expected by Sunday [Reuters]

US Debt Ceiling Update

• House Republicans Pass Debt-Ceiling Bill, Seek Talks With Biden
• Unexpected Last Minute Jump In Tax Receipts Gives US 1-Month Delay Until Debt Ceiling Crisis
• Biden Faces His First Big Choice on Debt Limit

In Case You Missed It

Japan Monetary Policy Decision (Friday)

In a closely watched decision, the BOJ on Friday announced it will maintain ultra-low interest rates, as expected, and made no tweaks to its yield curve control by a "unanimous vote".

However, the BOJ said it will remove forward guidance that pledges to keep interest rates at current or lower levels.

While the BOJ still expects CPI inflation to moderate by mid-2023, data released last week showed that nationwide core inflation remained sticky at 3.1%, well above the BOJ’s annual target of 2%.

Reuters

US GDP & PCE Numbers (Thursday & Friday)

WASHINGTON, April 27 (Reuters) - U.S. economic growth slowed more than expected in the first quarter as an acceleration in consumer spending was offset by businesses liquidating inventories in anticipation of weaker demand later this year amid higher borrowing costs. [Reuters] Inventories chopped off 2.26 percentage points from GDP growth.

While the FED's favourite prices-paid indicator stayed stubbornly high. Core PCE Price Index YoY +4.6%

Australia

Trimmed Mean CPI (YoY) Q1 at 6.6% slightly lower than expected, and trending lower slowly, is still way too high, and interest rates at 3.6% cash rate way too low.

• Greens move to freeze interest rates and rent hikes
• Paul Keating warns treasurer not to remove government's power to override RBA decisions
• Number of collapsing companies is surging

Following the RBA review there is move by both Labour and The Greens to ensure that Government (theirs of course) always has the final say in interest rate decisions.

Whilst this is still political rhetoric, the backdrop is deteriorating further. With the economy deteriorating fast, and interest rates / inflation settings clearly wrong, the markets will be having a long hard look at Australia and it's investment grade.

AUD / USD Trade Update

Short 0.7000

Short 0.7100

Stop 0.6825

Positive carry

Nearly there. The pivot low at 0.6585 is difficult to close below but we're getting there. With everything else going on, currencies are on the back burner. Except of course BOJ decision Friday.

Nothing more to add.

This Week's Economic Indicators [London time]