Ipek Ozkardeskaya
Swissquote Bank Ltd
SVB’s flash crash raised questions that other similar local banks in the US could also experience liquidity issues and may not be able to pay their depositors back, unless they also start selling their probably loss-making portfolios.
The US authorities now step in to avoid contagion.
The bank crisis will likely interfere with Federal Reserve (Fed) rate hike expectations.
Activity in Fed funds futures now assesses more than 98% chance for a 25bp hike in March, not because the US jobs data was soft enough to overhaul rate hike expectations last Friday, but because the Fed can’t ignore the issues caused by the steep interest rate increases in the banking sector and can’t afford to trigger a financial crisis to bring inflation back to 2%.
Tomorrow’s US inflation data is still important, but the developments across the banking sector could overshadow the data.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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