He euro and swiss franc recover part of the ground lost on Thursday, since markets reacted positively to the Swiss central bank’s support for Credit Suisse, before a complex meeting of the heads of the European Central Bank in which they will give definitions on monetary policy. For his part, he dollar shows a slight drop.
He euro rises 0.4% to $1.06225after having lost 1.4% a day earlierits biggest percentage drop in six months, to shift the focus of fears on the banking sector from the other side of the Atlantic, by the fall of the American Silicon Valley Bank, to Credit Suisse, a much larger entity.
The markets recover some calm after the Swiss bank said on Thursday that would borrow up to $54 billion from the Swiss National Bank to bolster liquidity and investor confidenceafter its shares plunged as much as 30% on Wednesday.
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That helped the Swiss franc strengthen and win 0.92% against the dollarto 0.9248, reversing part of its 2.15% rise on Wednesday, the biggest daily gain since 2015.
The Japanese yen, which usually acts as a safe haven, continues to receive purchases despite the markets calming down a bit. He dollar loses 0.5% against the yen to 132.77marking a 3.7% drop since the US currency hit its three-month high on March 8, before markets went into a tailspin.
The British pound rose 0.3% to $1.20890and the dollar indexwhich compares the unit against its six major pairs, is down 0.1% at $104,168 and resumes the four-wheeled downward path, only interrupted by Wednesday’s rise.
Paul Jackson, Global Director of Asset Allocation Research investcosaid that the nature of the banking system, such as its interconnectionMeant that any problem in the sector made investors particularly nervous. “It’s like walking through a forest at night, and if you’re nervous and you hear a noise that could be a squirrel or could be a bear, you react as if it were a bear.”
Nevertheless, the news of the Swiss National Bank’s support for Credit Suisse calmed things down a bit.
“Now Credit Suisse has the weight of the Swiss National Bank on its back, which is a central bank that doesn’t mess around in times of crisis,” he said. matt simpsona market analyst at City Index, adding: “So ultimately I think this is positive for market sentiment.”
European Central Bank
On Thursday, the European Central Bank (ECB) meets this Thursday to decide what to do with the interest rates. At their previous meeting of Februarythe ECB practically had committed to an increase of 50 basis pointsbut recent market turmoil has called into question these expectations.
“While recent data from inflation they clearly gave arguments in favor of the ECB promise to raise rates 50 basis points in March, the ongoing turmoil in the financial sector is casting doubt on whether policymakers will raise rates,” he said. Francesco Pesole, ING currency strategist.
The prices in the derivatives markets currently indicate around a 50% chance of a 50 basis point risewhich is an increase compared to the beginning of the week.
Pesole said that it was not clear either How would the euro react to the ECB decision?. “If the ECB’s 50 basis point rise occurs in an environment in which the markets are reducing their concerns about the banking sector thanks to the support of the SNB, then this could be interpreted as a sign of confidence from frankfurt on the health of the eurozone banking system and could ultimately boost the euro.
“In case the ECB forces a hike in a still fragile environment for the European banking sectorthe impact on the euro-dollar pair could be negative, since investors would see it as another important risk for the financial stability of the zone”.
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