The Fed's balance sheet increased at the same time that FXCM's US.BANKS basket declined. This, as the confidence crisis in the banking sector unfolded.
According to recently released data, U.S. banks borrowed nearly $165 billion from the Federal Reserve in the last week, following the failure of Silicon Valley Bank. The borrowing comprised of $153 billion from the Fed's existing emergency loan program and $11.9 billion from a new Bank Term Funding Program. These programs were set up after regulators stepped in to prevent other banks from having to sell assets due to depositors withdrawing their money, which was what happened with Silicon Valley Bank. The Fed's total balance sheet increased by $297 billion in the past week to $8.64 trillion. The borrowing is indicative of stress in the U.S. financial system and Paul Ashworth, chief North America economist at Capital Economics, warned that this crisis will likely have significant knock-on effects on the real economy.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.