US Fed increases dollar liquidity and rescue by UBS of Credit Suisse. As the SNB attempts to contain any possible financial spreading, UBS purchases Credit Suisse.
US Fed and global central banks boost dollar liquidity
Over the weekend, numerous other G7 financiers worked late into the night. the European Central Bank, the Swiss National Bank, the BoC, the BoE, the BoJ, and the Federal Reserve would take coordinated action to improve liquidity provision. In contrast, standing US dollar liquidity swap compliance arrangements. According to a statement from the Federal Reserve on Sunday.
US Fed along with the SNB initiative added market optimism
Despite the weekend news that Swiss bank UBS purchased troubled competitor Credit Suisse for about $3.2 billion. The European bank shares opened the session lower. The SNB will provide up to $110 billion in liquidity, and the Swiss government has promised to guarantee any losses up to a maximum of $9.6 billion.
Prior to the start of the financial markets on Monday, it was crucial to take quick action to restore confidence in the industry. Credit Suisse AT1 notes will be written down to zero as part of the rescue plan. Resulting in a $16 billion loss for the holders.
Dollar Liquidity Initiative by the Federal Reserve
Despite the concerted action over the weekend, European banks started the week off poorly. With the yield on the 2-year German bond (Schatz), the de facto benchmark for the Euro Area. Dropping to a new multi-month low, investors are still gravitating toward safe-haven investments.
Other haven commodities increased early on Monday. While short-dated US Treasury yields continued to decline and the Yen achieved a new one-month high against the US dollar. Gold briefly broke above $2,000/oz and reached a new one-year high.
Major economic activities will be due from the US mainly
The major planned economic event for the upcoming week will originate in the US, not Europe. On Wednesday, the Fed will reveal its monetary policy choice for March. Despite the turmoil in the banking industry, the FOMC is anticipated to raise borrowing costs for the ninth meeting with 25bp.
The Fed is still dealing with the same issues that other central banks deal with as prices stay stubbornly elevated. Consumer prices in the Eurozone increased at an annual rate of 8.5% in February, scarcely changing from January.
The core indicator, which excludes the erratic impacts of food and fuel, increased by 5.6%, exceeding the 5.3% increase in Jan. The official inflation goal set by the ECB is only 2 percent.
