Investors are particularly concerned about Credit Suisse. The Swiss bank's initial shareholder will "absolutely not" back it. Several European banks plunged this Wednesday, March 15.
 |
| Credit Suisse headquarters in Zurich, Switzerland. |
The euro and other major European currencies fell against the dollar on Wednesday, March 15, pulled down by a drop in European banking equities, while Credit Suisse, the bank's largest shareholder, ruled out future capital increases. The risk weighing on the banking sector on the eve of an ECB meeting prompted the euro to fall 1.24% to 1.0599 dollars at 11:25 a.m. GMT (12:25 p.m. in Paris), while the Swiss franc lost 1.22% to 0.9255 Swiss francs to the dollar.
Concerns are particularly focused on Credit Suisse. The Saudi National Bank, its largest shareholder, has stated that it will "absolutely not" back the Swiss bank by boosting its capital, according to its president, Ammar al-Khudairy.
Credit Suisse, the next SVB?
With the failure of the American bank Silicon Valley Bank (SVB), "it appears that an increasing number of investors are turning to CS (Credit Suisse, editor's note) as the next most likely domino," says Neil Wilson, analyst at Finalto. As a result, the stock price of the Swiss bank plummeted.
The concern for the foreign currency market is how the ECB will react at its meeting, whereas the banking sector's failures are the result of a difficult transition to higher rates. "The ECB vowed to hike rates by 50 basis points tomorrow, but it will not be enough to underpin the euro if concerns about the soundness of the banking sector prevail," said Jane Foley, an analyst at Rabobank.
On the other side of the Atlantic, investors now anticipate the United States Federal Reserve (Fed), which meets next week, to raise interest rates following Tuesday's inflation report. "The market, and he is correct in our opinion, is now pricing in a 25 basis point raise at the Fed's monetary policy committee meeting next week," says Derek Halpenny, analyst at MUFG.
Investors will also be watching the United Kingdom on Wednesday, when the Minister of Finance will submit his budget. But, the announcements are likely to be "pretty bland, with no big shift in fiscal policy predicted, unlike the +mini-budget+ of September 2022," which was comprised of ultra-costly measures and led the pound to plummet to a historic low, according to Carol Kong, analyst at CBA.