European and US financial markets have been shaken by fears of a domino effect linked to problems in the banking sector.
Indeed, in the United States (Signature Bank and Silicon Valley Bank) and in Switzerland (Credit Suisse) banks have found themselves in a position of bankruptcy.
After two weeks of relative panic on the financial markets, the action of regulators has stabilized the sector.
In the United States, the Federal Reserve raised key rates by 25 basis points. The CPI (Consumer Price Index), the main measure of inflation, reached 6% (annualized rate) in February, continuing to decline since June 2022 (9.1%). Inflation, however, still remains above the Federal Reserve’s 2% target, which Bank of America says could be achieved by the end of 2024.
In Europe, the European Central Bank raised its key rates by 50 basis points on 16th March. Inflation remains high, reaching 8.5% (annualized) in February for the euro area as a whole.
The ECB also said that in its fight against inflation, it could resort to another method: tightening financing conditions. Thus, stricter credit access conditions for firms and households could cause a significant drop in demand, resulting in a fall in inflation.
It should be noted that such a measure may lead to a decline in consumption and production and thus increase the risks of recession.
Regarding crypto-currencies, the major event of March was a short-lived earthquake, tested by the ecosystem of stable dollar coins.
Indeed, for a weekend (March 11 and 12), the Stable Coin USDC which represents the fifth cryptocurrency in terms of market capitalization (about $ 32 billion), and whose price is supposed to be correlated to the dollar; saw its price fluctuate greatly (falling below $0.8 in some exchanges). The majority of Stable Coins in the area were also affected.
These price movements were caused by U.S. banking problems. Indeed, the company Circle that issues the Stable Coin USDC was one of the customers of the SVB bank, creating a panic effect on the crypto markets.
We can note that despite the problems and uncertainties of the European and American banking sector, the crypto-currencies sector has remained strong with an NCI 120 recording a 16.63% gain over the month of March.
In conclusion, while we must remain cautious about the risks inherent in the US and European markets, we affirm, more than ever, the need to remain diversified and maintain high-quality assets with some long-term potential.