Unfortunately, I am late after the U.S. economic data changed the picture on the state of the U.S. economy, inflation and interest rate hike bets.
The turmoil at Credit Suisse roiled European bank stocks and also led to heavy selling in New York as investors remained unsettled following the collapses of regional banks last week. Demand for bonds rose on safe haven demand, causing bond yields to fall again sharply.
I believe the worries are somewhat exaggerated, but any further sign that banks are coming under more pressure may lead to further panic selling.
Markets are deeply divided on the outlook for monetary policy and further rate hikes or even cuts by central banks. The turmoil at Credit Suisse comes just a day before the ECB's next interest rate decision. Concerns about a monetary policy mistake could lead the ECB to slow down (possibly even suspend) the rate hike. The EUR has faced strong headwinds from these growing expectations.
