GBPUSD Rises on Positive Investor Sentiment As the Dollar Falls

The GBPUSD currency pair was trading up over 50 pips, boosted by positive investor sentiment after Silicon Valley Bank found a buyer in First Citizens Bank & Trust Company. The buyout of SVB boosted risk assets such as the British pound as demand for safe-haven assets such as the US dollar declined.

The much weaker US dollar also boosted the Sterling’s rally as investors were again hunting for risk assets with higher returns, such as stocks and the pound, which trades at a higher valuation than the US dollar. 

However, investors in the Forex markets should be careful with their trades given the general lack of liquidity in the FX markets, as liquidity flows into other market segments, such as US government bonds, whose yields are attractive. 

Furthermore, investors have started stockpiling gold, which is regarded as the defacto safe haven asset, given that it is not subject to the whims of a central bank. Gold has witnessed a significant recovery since the US banking crisis started. 

Finding a buyer for Silicon Valley Bank’s assets was a significant win for the Federal Deposit Insurance Corporation (FDIC). However, First Citizens Bank & Trust Company only bought SVB’s assets and loans worth $72 billion, leaving the FDIC holding about $90 billion of SVB’s assets. 

Moreover, First Citizens Bank bought SVB’s assets at a massive discount since it paid $16.5 billion for assets worth $72 billion. Still, the move reassured investors that there could be bidders for fallen banks interested in serving the orphan clients from such banks when they collapse. 

Additionally, news that the Federal Reserve may extend more liquidity to First Republic Bank reassured investors that we might be nearing an end to the recent bank runs that left many regional US banks struggling as their stock prices fell. 

However, investors should remain vigilant, given that this is the final week of the first quarter. This means many investment firms will be unwinding some positions to book their profits and generate a return. We could witness a selloff in robust companies due to the quarterly profit-taking activities of most funds. 

*This is not investment advice. 

The GBPUSD price chart.

The GBPUSD currency pair traded up 50.7 pips (0.41%) as the pound edged higher against the US dollar.