In theory, the local event of Tuesday’s session will be the decision of the Monetary Policy Council (RPP) concerning interest rates. However, no one believes that there will be any changes to the cost of money today. Crude oil continues to hover around recent lows. Nvidia is leading a counter-attack on the market.
Relax, It’s not March Yet
Over the past several months, we have come accustomed to the decisions of the Monetary Policy Council heating up the local markets. Today, however, analysts’ expectations suggest that absolutely nothing will happen. This applies not only to interest rates, but also the overall message will likely remain unchanged. What’s more, no one eagerly awaits tomorrow’s press conference of President Glapinski. He recently stated quite definitively that no changes should be expected until March. This is due to the fact that at the end of the first quarter, the National Bank of Poland will have new economic predictions. Their timeframe will then be shifted, providing hope that an inflation-related return to target may be on the horizon. The market narrative, however, is slowly shifting from dynamic disinflation to identifying potential threats to price acceleration in the second half of the year. Administrative price anchors, which are currently artificially deflating actual prices, will then be lifted. Additionally, the first consequences of increased budget spending and minimum wage hikes should begin to appear. It’s clear that the current Council is not favorably disposed towards the new government, suggesting that they may use this as an excuse to tighten monetary policy.
Crude Oil as an Excuse?
A lot of interesting things have been happening in the crude oil market recently. It would seem that due to increased geopolitical risk in the areas around the Red Sea, the price of “black gold” would be on the rise. Currently, however, it is hovering around long-term lows, particularly after yesterday’s sharp depreciation. The market is slowly recognizing that this might be an opportunity to put new pressure on the Federal Reserve, as cheap oil is highly beneficial for combating inflation. At the start of the new year, investors came in with a strong belief that a cycle of interest rate cuts would start in March. However, with each passing day, the chances of that happening seem to diminish. Yesterday’s statements by members of the Federal Open Market Committee, such as Raphael Bostic, indicate once again that the cost of money should remain restrictive for a longer period of time. Alternatively, if interest rate cuts are postponed, discussion has shifted towards hampering the QT (Quantitative Tightening) program. For some time now, the Federal Reserve has been withdrawing excess money from the market. Suggestions have surfaced that as early as April, there may be a slow decline in this tightening.
Nvidia Breaks Into China
The beginning of the year belonged to the dollar, and at the same time, we saw a certain distancing from riskier assets. It was not a successful period for stock markets. That lasted until yesterday, although the first part of the session did not herald any improvement in sentiment. Later, however, news broke that Nvidia will start production of chips in the second quarter of this year, which will be able to reach the Chinese market despite restrictions imposed by the President’s administration. This caused quite a euphoria, which, riding the wave of optimism, wiped out a significant portion of losses from recent days. Last year’s AI revolution has made Nvidia stocks a new barometer of market sentiment. This mood improvement can also be seen on the foreign exchange market, which is supporting our złoty (Polish currency). Yesterday, the dollar once again contemplated testing the 4 złoty cap, but it is currently 4.5 groszy below that level. Also, the Euro, after bouncing off the upper limit of consolidation, returned to 4.33 zł.
Krzysztof Adamczak – Currency Dealer at InternetowyKantor.pl
