Concerns about the condition of the banking sector and the looming specter of a global recession have caused huge sell-offs in global stock markets. The Fed, BoE, and SNB have decided to raise interest rates, nevertheless, the market is now pricing the imminent end of the monetary tightening cycle. With the huge volatility and possible rebalancing in the market, it is imperative to keep a close eye on how the current flow of capital to the major markets is going. Be sure to watch TNOTE, DE30 and GBPJPY next week!
TNOTE
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Open account Try demo Download mobile app Download mobile appThe FOMC rate decision and Jerome Powell's conference were the key events of last week. The FOMC raised rates by 25 basis points, and Powell assured that the situation in the banking sector is under control. Nevertheless, the market is concerned that the problems could grow and spread to other markets, which would have a domino effect. The market is now pricing in a near 75% chance of keeping the rate level unchanged at the next FOMC meeting, which, combined with macro data suggesting an impending slowdown in the economy, is creating a lot of interest in the bond market. Will US TNOTE manage to extend last week's gains?
DE30
The German stock market was in the spotlight for investors last week due to the uncertainty surrounding Deutsche Bank, one of Europe's most important banks. CDS, or credit default swaps, rocketed to levels not seen in years, and a lack of confidence in the institution caused a retreat from Deutsche's safest corporate bonds. Germany's stock market will also react to the country's CPI inflation reading, which will be released on Thursday, March 30.
US500
The most important stock market benchmark is likely to see increased volatility this week. On the one hand, the Fed's balance sheet and the injection of liquidity transferred to the banking sector should support the demand side in the short term. It is also worth remembering the fact that the Fed is nearing the end of the rate hike cycle. On the other hand, the market fears that the problems could spread, which, combined with the specter of an impending recession, does not encourage capital placement in risky assets. In this context, the key macro reading scheduled for this week will be Friday's PCE inflation report.
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