Yesterday’s data from the United States proved to be a severe test of patience for investors hoping for a weakening dollar. Initial readings were very good, but the exchange rate stayed put. The economic index, just as most indices recently, did not disappoint and sparked pessimism. In the background is a change in perspectives on interest rate cuts in Poland next year.
Data from the US Seemingly Good
At 14:30 yesterday, we learned about a large package of data from across the ocean. It started with information about the final value of the GDP. Since these readings showed a rounding result of 0.1% increase, it is objectively a positive result. Additionally, better data regarding orders for goods were shown in August. Without the means of transport, order numbers increased by a whopping 0.5%, expected to rise by 0.1%. Interestingly, orders for durable goods did not change, which may at first raise concerns. However, it is worth noting that analysts expected a decrease by as much as 2.6%. Jobless benefit applications are again dropping, currently standing at the level of 218,000 per week, which is the best result since mid-May this year. To this, add the published growing index of signed home purchase contracts at 16:00.
How Did the Markets React?
One may assume that after this package of good data, the dollar should strengthen. This was indeed the case. However, the movement was relatively sluggish and showed that many investors were looking for an excuse to escape this currency. At 17:00, the Kansas City Fed Index for the industry was published. Although this is not the most important publication, a much weaker result with expectations was enough to cause a significant change in the market. Analysts expected that the index would show 9 points and maintain some optimism. Eventually, however, -18 points were presented, and it posed a serious problem. Investors ignored the previous better readings and witnessed the depreciation of USD against the euro by almost half a cent. It is worth noting that an additional factor behind the dollar’s weak stance is that markets are expecting a 0.5% reduction in interest rates for the post-election FED meeting, double the value compared to what was expected a few weeks ago.
When Will Interest Rates Be Cut in Poland?
The issue of lowering interest rates in Poland is a complex matter. In fact, there is significant political pressure due to clear conflict between the president of the NBP and the majority of people in the Monetary Policy Council appointed by the same political camp that chose the current ruling formations. However, it is becoming increasingly clear that credit rates may eventually fall. While the 6-month WIBOR rate is standing still, suggesting nothing significant until March, there has been a timid move down on the one-year WIBOR rate for several weeks. This indicates that the market is starting to price those cuts over the next 7-12 months.
Today, in the macroeconomic data calendar, it is worth paying attention to:
14:30 – USA – American income and expenditure,
16:00 – USA – The number of oil drilling rigs in the market.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://ceo.com.pl/inwestorzy-czekali-na-pretekst-i-sie-doczekali-41987
