Europe

The recent uncertainty regarding the health of the banking systems in the US and Europe is not having any material impact on overall financial conditions or economic sentiment. The aggressive rate cut expectations, especially in the US, are unlikely to be realized. Although the macro growth and policy backdrop remains unfriendly for corporate debt on both sides of the Atlantic.

China is launching a diplomatic charm offensive to improve relations with the world excluding the United States. But China’s proposals in Ukraine and the Middle East are overrated in their ability to restore global stability and reduce geopolitical risk.

This week’s report looks at the banking crisis within the context of shrinking dollar liquidity and implication for FX markets.