The banking crisis that shocked the global market in March was brought under control after the European and American governments and central banks dealt with it quickly, thus the risk has not spread so far. The market once believed that the Fed would adjust its monetary policy substantially, and even cut interest rates in response. However, after promising to protect depositor funds and ensure sufficient liquidity, the bureau has not made immediate major changes in monetary policy. However, the Swiss National Bank’s handling of disputes of Credit Suisse has caused funds to flow into Asia from Europe and the United States. But on the whole, the spread of the crisis has been quickly and effectively prevented. The confidence in financial market seems to be gradually recovered, and the US stock market rebounded significantly after falling to the low level in mid-March.

U.S. non-farm payrolls rose roughly in line with expectations in March, and the unemployment rate fell back to 3.5%. However, the hourly wage growth slowed down to 4.2%. The overall labor market performance has slowed down but still maintained a certain degree of resilience. Other parts such as retail sales and housing data are not as satisfactory. Inflation data continued to fall but the core CPI fell little. Most of the recent remarks by Fed officials emphasized that inflation is still high and interest rates need to continue to be raised, while some officials have a relatively dovish stance. The market believes that the bureau will suspend interest rate hikes after raising interest rates by 0.25% in May, and it is more likely to start reducing interest rates near the end of the year.

The market's worries about the US economic recession have not subsided. The previous violent interest rate hikes have a lagging impact on the economy, and the banking crisis has not spread on the surface. However, the total deposits of U.S. banks continue to decrease, and small and medium-sized banks have tightened lending in order to protect themselves. The impact on the real economy is equivalent to raising interest rates. The chance of a U.S. recession in the second half of the year cannot be ignored. The U.S. dollar index recently fell to the low of 100.82 in early February before rebounding, but the rebound was not strong, basically constrained by the 20-day moving average, and the overall downward pressure remained unabated. The Fed still emphasizes that there is little chance of cutting interest rates this year, but the market is on the other side, obviously wanting to weaken the US dollar.

Patrick Law

General Manager of Hantec Group