The search for yield is gaining momentum in the financial market, with the SPX futures crossing the 4000-point mark (a high since March), while gold plummeted by over 1% to $1950 per troy ounce. The dollar index is declining due to the strengthening euro, as the storm related to Credit Suisse's acquisition and losses of several investor groups (primarily in AT1 subordinated bonds, which had to be written off) is gradually subsiding, and the risks of "contagion" are decreasing.

At the same time, there is an increase in yields on treasury bonds, indicating a higher chance of a hawkish outcome at the upcoming Fed meeting. The chances of a 25-basis point rate hike are already above 50%, which is justified, as the Fed managed to extinguish the beginning fire in the banking sector by expanding deposit insurance, transferring losses of troubled banks onto its own balance sheet through asset purchases, and currency swaps lines with other major central banks. In addition, there is a rumour that the US Treasury is considering insuring deposits exceeding $250,000. Just discussing this idea should reduce the risk of bank runs. Since last Friday, the S&P 500 Financials index has gained 3.4%, with today's increase being 2.3%.

Tomorrow begins the two-day Fed meeting. It is expected that the rate hike will be 25 basis points, which should demonstrate the central bank's confidence in the banking sector and emphasize that the focus remains on inflation. At the same time, the decision to pause the hike, however paradoxical it may be, could be perceived as a signal of concern from the central bank and limit the current market rally. According to rate futures, the probability of a 25-basis point hike is 60%, which means that if it does happen, the dollar is likely to start recovering in price.