IFX Market Report: Thursday 16th March 2023

Last week, the U.S banking industry was rocked by the news of SVB and several other smaller banks. This week, Credit Suisse was at the centre of attention as its top shareholder, the Saudi National Bank (SNB), ruled out providing fresh funding due to regulations that limit its stake to 10%. Shares plummeted by 30% on Wednesday, causing widespread panic on trading floors, with trading in Credit Suisse shares on the Swiss market halting and shares in other European banks taking a hit.

However, this morning, Credit Suisse accepted a CHF 50bn lifeline from the Central bank, which was welcomed by the financial markets, causing shares to rise by as much as 32%. Analysts still expect the bank to be bought out in the near future, with UBS as front runners.

Meanwhile, despite recent banking concerns, Janet Yellen, the Treasury Secretary, is set to reassure the Senate Finance Committee that the U.S. banking system remains sound, and Americans can feel confident about their deposits.

In the UK, Chancellor Jeremy Hunt delivered his first full budget speech to Parliament, stating that the British economy is "proving the doubters wrong" and will avoid a recession, with the government's plan for the economy "working". The Office for Budget Responsibility (OBR) predicts that the UK will avoid a recession in 2023, despite previous predictions. However, the economy is still expected to contract overall by 0.2% this year, and living standards are still expected to fall by the largest amount on record.

The OBR also predicts that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023. This positive news boosted the pound across the board, with GBPUSD touching 1.21, up from 1.2030, and breaking through 1.14 against the Euro. EURUSD currently resides around 1.06.

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