Worst yet to come?

It’s been another remarkable day in financial markets and it, unfortunately, doesn’t feel like the worst is behind us.

Fear has once again gripped the markets, concerned about a repeat of past crises – one in particular, for obvious reasons – and the implications for the financial system and the global economy. Of course, this is natural when so little is known about the situation and what it ultimately means for the health of the rest of the system.

In the absence of facts, everyone is left with little choice but to speculate and frankly, what little commentary we’ve had hasn’t really helped. Quite the opposite, in fact. Ignoring the expected comforting words from Credit Suisse Chief Executive, Ulrich Koerner, and Chairman, Axel Lehmann, those of its largest shareholder, Saudi National Bank, and the lack of input from the central bank and regulator have only fueled fears.

We’re now left in a situation in which stock markets have tumbled, banks around the world have been pummeled and everyone is wondering just how bad the situation is going to get. The bill may be coming due for more than a decade of rock-bottom interest rates and a massive quantitative easing experiment.

Perhaps the market reaction and all of the speculation today are overblown but in the absence of action or clarity from the relevant authorities, which is lacking currently, it’s hard to imagine the panic subsiding. Perhaps the silence is evidence of them attempting to get that clarity themselves and deal with it but I get the feeling it’s going to be a very eventful end to the week.

Against this backdrop, it’s anyone’s guess what the ECB will do tomorrow. Markets are currently anticipating a 25 basis point hike but we’ve seen how much rate expectations have changed over the last week. And then you have to wonder what exactly would soothe market jitters? No change? Or does that suggest something deeply concerning is occurring? Or stick to 50 and pretend like nothing is going on? I just don’t know at this point.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.