On Thursday, both the Bank of England and the Czech National Bank decided to cut interest rates. This decision was expected, but looking at currency quotations, it did stir some emotions. In the background, the chances of a series of rate cuts in the US this year are increasing.
Great Britain lowers interest rates
As expected, there was a decrease in interest rates in the British Isles yesterday. The new interest rate level is 5%, which is a decrease of 0.25%. It should be remembered that the Bank of England is the only one of the main central banks to publish voting results immediately after the decision. 5 members of the decision-making body voted in favor of the reduction, and 4 for maintaining the rate. Therefore, it seems that the whole decision was made by one vote, which shows a lack of unanimity. The markets expected such a distribution of votes. Therefore, it is not surprising that part of the investors hoped that one person from the group of five would change their mind and the cut would not happen. That’s why, after the decision itself, there was a move to depreciate the pound, which is still ongoing this morning as I write this text.
Czechs in line with expectations
The Czechs continue their cycle of interest rate cuts. Yesterday’s meeting went without surprises, and the main interest rate fell from 4.75% to 4.5%. This is the 6th consecutive decision to cut rates. As part of these 6 moves, the interest rate fell from 7% to 4.5%. It’s worth mentioning that the Czechs started cutting rates when Poland had already reduced from 6.75% to 5.75%. However, since then, the interest rate in Poland has remained unchanged, while in the Czech Republic, it has been steadily dropping. The current Czech rate is only 0.25% above that for the eurozone. Therefore, we could expect that the pace of reductions will not be maintained. Yesterday, after the decision, we witnessed a strong strengthening of the Czech crown. Some investors had hoped for a stronger cut.
Weaker data from the USA
Yesterday, we saw another weaker reading from the US job market. The number of jobless claims reached 249 thousand and remains in a clearly increasing trend. The increasing number of applications suggests that we can soon expect an increase in the unemployment rate. The weaker state of the job market, in turn, gives us another signal potentially accelerating interest rate cuts overseas. If the job market is weak, the Federal Reserve will be all the more willing to lower interest rates, so that no one will attribute it responsibility for a wave of unemployment, caused by the high cost of money. This can be seen in the quotations of futures contracts for the interest rate, where the chances for further reductions after September are increasing. Currently, there are three more cuts expected this year, one at each session.
Today, in the macroeconomic data calendar, attention should be paid to:
14:30 – USA – job market situation,
16:00 – USA – goods orders.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl and Walutomat.pl
Source: https://ceo.com.pl/bank-anglii-i-czeski-narodowy-bank-obnizaja-stopy-procentowe-rosna-szanse-na-podobne-ruchy-w-usa-12014
