This week, the markets are eagerly awaiting the upcoming interest rate decisions. The Fed in the USA will make the first move today, Wednesday. For the first time in the current cycle, no increase in the key interest rate is expected. For tomorrow’s interest rate decision by the ECB, on the other hand, the market expects a further rate hike of 25 basis points.
Surprisingly good figures came from the US labor market in the previous week. Despite the strong growth in employment, however, economic growth has recently been rather meager. Recession risks also remain at an uncomfortably high level.
The representatives of the Democrats and the Republicans have reached an agreement in the dispute over the debt ceiling in the USA. The cap of $31,400 billion is to be suspended until 2025. Subject to approval in the House of Representatives and Congress, the agreement is positive for the financial markets. However, another effect could weigh on the markets further down the line.
Global growth is likely to cool significantly in the second quarter. At the same time, recession risks remain uncomfortably high, as Chief Economist Gerhard Winzer writes in his market commentary. The further course of negotiations on the US debt ceiling is also likely to cause tension on the market.
How much longer will the sideways trend on the stock markets last? Negative and positive factors balance each other out. One unresolved issue among many is the U.S. debt ceiling.
Most recently, central banks have signaled a somewhat less sharpish stance, as an effect of the rapid key rate hikes on the monetary environment has already become visible. However, recent economic data are dampening hopes for a rapid decline in inflation, as Chief Economist Gerhard Winzer explains in his market commentary.
The global economy grew strongly in the first quarter of 2023. At the same time, inflation remains too high, which is why central banks will continue to pursue a restrictive monetary policy. Although growth indicators are good to strong, there are therefore increased risks of recession.
Since the banking problems in the US emerged in March, share prices have risen and expectations for future key interest rates have fallen significantly. However, inflation dynamics remain the most important factor for the markets, but unfortunately also one that is difficult to assess.
The current crisis of confidence continues to dominate market activity and has significantly increased uncertainty about the future development of economic indicators. Read more in the current market commentary by Chief Economist Gerhard Winzer.
Last week brought good, bad and inflation-fighting news, all from the US. At the start of the new trading week, the focus is on the turbulence surrounding Silicon Valley Bank.
