Renewed concerns over the health of the global banking sector are driving investors toward safe havens this morning, lifting the dollar against its major counterparts. North American equity futures are setting up for a weaker open, Treasury yields are down, and currencies like the Canadian and Australian dollars are underperforming relative to the Japanese yen and Swiss franc.

Financial sector stocks began to weaken last night after First Republic Bank said it had lost more than $100 billion in deposits during the first quarter, forcing it to cut staff and reduce lending activity. Selling continued in the European session when UBS and Santander reported softer earnings and warned of headwinds ahead. European government bonds rallied, with German yields descending at a rapid clip.

The Federal Reserve and a raft of other major central banks said they would shift back to weekly dollar swap auctions after moving to a daily cadence during the height of the banking turmoil in March. In an announcement published last night, they said “In view of the improvements in US dollar funding conditions and the low demand at recent US dollar liquidity providing operations, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank, in consultation with the Federal Reserve, have jointly decides to revert the frequency of their 7-day operations from daily to once per week. The move isn’t likely to influence short term market pricing – the willingness of policymakers to provide dollar funding during stress episodes is now well understood – but does indicate officials are comfortable with sounding an implicit all-clear on the banking sector, convinced that problems at US regional lenders and Credit Suisse were outliers within a generally strongly-capitalized financial system.

Overall foreign exchange market volatility is steadily reverting toward pre-crisis levels, suggesting that traders are struggling to find new directional narratives. With investors bracing for a generalized global slowdown and major central banks nearing the end of their tightening cycles, market-moving surprises are becoming less frequent, and obvious catalysts for big moves in specific currency pairs are in short supply. We suspect this could last through the early part of May, but isn’t likely to survive contact with the hype cycle surrounding debt ceiling negotiations in early June.

Despite a small setback in overnight markets, the euro’s technical setup looks constructive for now, with the mid-April high at 1.1076 in sight as investors bet on additional rate hikes from the European Central Bank. A wider drop in risk concerns could also see the pound rally, with its April 14 peak at 1.2545 looking clearly achievable.  In contrast, the Canadian dollar is still in a defensive crouch, with deepening household vulnerabilities hobbling any upside potential.

There’s little in the data docket for the day ahead. Two gauges of real estate market activity – the S&P CoreLogic Case-Shiller 20-city home price index for February, and new-home sales numbers for March – are expected to show signs of modest stabilization after cooling for much of the last year. The Conference Board’s consumer confidence index is seen inching lower, from 104.2 in March to 104.0 in April. And the Richmond Fed’s manufacturing survey is seen pushing further into contractionary territory, to minus 7 in April from minus 5 a month earlier.