The US dollar index or it is also known as DXY slumped further below the 104.00 threshold in Monday's trading (13/March). That is as the greenback was in a slump in all major currency pairs. 

Market participants expect the Federal Reserve to be more dovish in its next interest rate announcement. That was following the collapse of Silicon Valley Bank (SVB) and other banks at the end of last week.

The United States today announced a number of emergency policies to prevent the widespread impact of the fall of Silicon Valley, Signature Bank, and Silvergate Bank in its financial system. 

SVB and Signature Bank customers can access their funds again as soon as possible. The Federal Reserve will take a role to increase funding which is done through the Bank Term Funding Program. 

Jumbo Rate Hike May Not be Done Again

The program provides short-term loans on lighter terms to add liquidity to banks and financial institutions in need. Those policies contributed to easing the panic. 

However, the restlessness has not completely disappeared. Market participants began to speculate that the Fed would not dare to raise interest rates on a jumbo scale again. 

At the same time, the market will also highlight the release of United States inflation data tomorrow to find out how much urgency the continued "rate hike" will be. From the FOMC's perspective, their main concern still remains inflation.

Furthermore, inflation hasn't really gone down as it was said by Carol Kong, a currency strategist at the Commonwealth Bank of Australia who expects tomorrow's inflation data to remain high.

25 BP increase is More Possible

However, given what's happening in the U.S. financial system, a rate hike of 25 basis points is more likely than 50 basis points. Terminal interest rate expectations should be below the peak reached during Powell's testimony on Tuesday.

That comes with a likely more cautious approach following this (SVB) mess. That was said by Karl Schamotta, a chief strategist at Corpay Several days ago in an occasion. 

This episode will contribute to a backdrop of higher levels of volatility. This was as investors watch carefully in anticipate other rifts that arise as Powell's testimony continues tightening of Fed policy.

Following Fed Chairman Powell's testimony last week, Fed Funds Futures had factored in a nearly 70% chance of the next rate hike of 50 basis points. After the outbreak of the SVB crisis, the situation changed drastically.

Oil Prices Rally due to SVB 

That was until the odds became 82% for an interest rate increase of 25 basis points. In fact, there are a small number of market participants who think the Fed will not raise interest rates at all at the FOMC meeting on March 21-22.

Elsewhere, the Crude oil prices rallied in Monday (13/March) trading in connection with the US banking crisis. At the time of the news, Brent oil was up by 0.53 percent at $83.29 a barrel.

Meanwhile, the WTI crude was up by 0.50 percent at $77.07s a barrel. At the end of last week, the Federal Reserve along with US financial authorities made an emergency monetary intervention.

The aim is to restore banking confidence after the collapse of Silicon Valley Bank (SVB). The collapse of one of Uncle Sam's country's leading banks is an alarm that high interest rates may be starting to hurt the economy. 

A Meeting was Held to React the SVB collapses 

The situation above is feared to spread and have a systemic impact on the US economy. To that end, the Fed is scheduled to hold an emergency closed-door meeting to discuss follow-up actions after the SVB collapse today. 

Market participants believe the Federal Reserve will lower their hawkish rhetoric on the prospect of aggressive rate hikes after signs emerged of economic damage.

That damage is caused by high interest rate trends. This prompted the United States dollar's slump against major currencies while also benefiting the oil market.