After a week with the focus on central banks, economic data will be back at the center, surrounded by the ongoing banking crisis. The DXY finished the week lower, but looking stronger, resurfacing even as US yields tumbled, helped by a deterioration in market sentiment.
A new market season started on March 8 with the Silicon Valley Bank collapse. In the most recent episode, more central banks decided to raise rates showing determination to bring inflation down despite banking jitters. Developments in the banking sector will continue to be critical for sentiment and monetary policy expectations. It has tightened bank credit standards, doing part of the central bank's job. Next week, central bankers will probably stay close to the recent guidance next week.
On Wednesday, the Federal Reserve (Fed) raised rates by 25 bps as expected, signaling a dovish pace of future hikes. Initially, markets reacted by selling the US Dollar, and Wall Street cheered timidly. That day, markets heard from Fed officials for the first time since the banking system crisis.
Wall Street finished the week with modest gains, and the VIX dropped sharply. Still, regional bank stocks remain under pressure and with the potential to damage confidence significantly. During the weekend, market participants will stay alert on potential banking news. Also, US Treasury Secretary Janet Yellen could be preparing some surprises.
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