Yesterday was the day: The ECB raised the key interest rate for the euro area again by 50 basis points to 3.5 percent. Since last July, the central bank has thus increased by 350 basis points in six steps. The reason is rampant inflation: According to an estimate by the European statistics authority Eurostat, inflation was 8.5 percent in February. Yet monetary policy is currently just the accompaniment in Financial Crisis 2.0. The ECB stressed, “The euro area banking sector is resilient: capital and liquidity positions are sound.” Well then….<\/p>\n
![\"\"](\"https:\/\/bernstein-bank.azureedge.net\/wp-content\/uploads\/2023\/03\/eurusd_20230316.png\")
Source: Bernstein Bank GmbH<\/p><\/div>\n
You can see how much nervousness in the banking market affects the exchange rate in the four-hour chart of EURUSD. Silicon Valley Bank, Signature Bank and especially Credit Suisse caused wild ups and downs. Flight into safe US government bonds versus new risk appetite and short recovery in European stock markets. You can take your pick after which headline the forex pros switched positions. In any case, the vola brings some opportunities for savvy traders.<\/p>\n
Tension at the banks<\/strong>
\nIt looks like the situation in the US has eased recently. Or has it? Yesterday, the largest U.S. banks decided to bail out the next teetering regional institution, First Republic Bank. Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank want to raise a total of 30 billion dollars. The question now is whether, with an easing in the current U.S. banking crisis, the Fed will not continue its tightening, which would strengthen the dollar.<\/p>\nBigger credit crunch than in 2008<\/strong>
\nHowever, there seems to have been quite a bank run recently at many U.S. banks, the institutions need fresh money; which speaks against higher interest rates. The “Frankfurter Allgemeine Zeitung” took a look at the Fed’s emergency measures: “Data published by the U.S. Federal Reserve showed borrowing of $152.85 billion through the discount window, the traditional liquidity reserve for banks, for the week ending March 15. The record figure compares with a volume of $4.58 billion in the previous week. The previous all-time high from the 2008 financial crisis was $111 billion.”
\nSo does the Fed need to take a pause in tightening? The dilemma here is that if the Fed admits this, the market could interpret it as a panic signal – how bad is the situation really<\/p>\nOur conclusion: The most important question for forex traders at the moment is whether more commercial banks will wobble. If larger, systemically important addresses topple, investors around the world are likely to move their money to safety in U.S. bonds. Which should strengthen the dollar. However, it would then be difficult for the Fed to raise interest rates; it would probably even have to respond with a new quantitative easing. If things settle down, money will flow out of U.S. bonds back into equities around the world, which should tend to weaken the greenback. So keep an eye on the real-time news – Bernstein Bank wishes you successful trades and investments!<\/p>\n
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The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. <\/small>CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"
17.03.2023 \u2013 The European Central Bank (ECB) has raised its key interest rate once again. But the market currently cares rather little. Because even among forex traders, the back and…<\/p>\n","protected":false},"author":41,"featured_media":25874,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[6],"tags":[],"class_list":["post-25870","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n
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