The Złoty continues to be influenced by yesterday’s decision of the Monetary Policy Council. Today we are awaiting a press conference by the NBP President, Adam Glapiński. Globally, the focus remains on the American labor market. The euro-dollar rate is catching its breath at around $1.05.
Is It A Surprise?
Yesterday’s decision by the RPP was ostensibly in line with the market consensus. However, the reaction on the Polish Złoty suggests that the market was privately hoping for a more significant move. The decision to lower interest rates by 25 basis points resulted in a noticeable strengthening of our currency. As always, the key point will be the press conference, where we might learn about further plans for monetary policy. It is expected to downplay emotions about further rate cuts, or even declare that the last two sessions do not signal the beginning of a cycle. The malicious could add that since the next meeting is to take place after the elections, there is no reason for further moves at the expense of money. The fact is that inflation, although it has been falling dynamically recently, is still far from the NBP’s target. What’s more, the nature of these declines is debatable, and it is extremely doubtful that this pace will continue. Suggestions are slowly appearing that premature rate cuts may halt this trend altogether.
From a market perspective, it is worth noting that the weakening of the Złoty, triggered by last month’s RPP decision, has been halted. The Euro has returned below the level of 4.60 PLN and slowly looks as if it will seek some consolidation at these levels. Since yesterday’s peak, the dollar has already gone down 8 cents, dropping to 4.37 PLN. The Swiss franc and the British pound are also falling today.
Labor Market at the Crossroads
The most important global reading this week will be tomorrow’s NFPs, namely the government report on employment in the non-agricultural sector. Analysts have a problem with setting their expectations. On one hand, the so-called “JOLTS” turned out to be exceptionally optimistic on Tuesday, while yesterday’s ADP was already very disappointing. The final result was nearly twice as low as predictions. Investors attach such great importance to the labor market because they believe it may prompt the FED to end the cycle of increases. It is commonly known that it is dear to the hearts of decision-makers from the Federal Reserve, so any signs of its weakness raise a lot of hope among doves. Regardless of yesterday’s turmoil related to the ADP, the dollar remains strong. Much suggests that tomorrow will end the twelfth decrease week in a row on the main global currency pair. Such a clear and lasting trend on this pair is an extremely rare occurrence. Over these three months, the euro has already lost 8 cents. Today we are already around $1.05, which is an important technical level. Its conquest could open the way even to parity.
Today there are no major macro-economic readings. However, there will be speeches by members of decision-making bodies from many central banks. We will be most interested in the conference by President Glapiński, but in addition, Nagel and Guindos from the ECB, and Daly, Barkin, or Kashkari from the FED will also speak.
Krzysztof Adamczak – currency dealer InternetowyKantor.pl
