The unexpected streak of the dollar continues. The American economy is showing better quality than the Old Continent, hence the flow of money. In the background, Australia leaves interest rates unchanged.
Continued strength of the dollar
Friday data strongly strengthened the dollar. Good employment market data usually lead to currency strengthening. Yesterday, we added the better-than-expected ISM index to this. As if that wasn’t enough, the prospect of a rate cut in March is receding. Considering that the main opponent in the longer-term maintenance of high interest rates stifling inflation was to be economic slowdown, this problem is somewhat receding. It’s hard to talk about a slowdown with a strengthening job market. After yesterday’s strengthening, the dollar exchange rate bounced off its best levels against the euro since December.
Conjuncture in Europe remains unchanged
The final PMI index for services for the eurozone was 48.4 points. This result was in line with expectations but showed pessimism. Scores below 50 points indicate a predominance of negative responses. While this index is not as important as for the industry, remember that the industrial index performs even worse. In recent years, industrial indices have generally performed slightly worse than those for services. The relative stagnation across the ocean is a reason for the strength of the dollar. The worse the economy of the eurozone will look, the faster we will see interest rate cuts. Conversely, the sooner we expect cuts in the eurozone compared to the USA, which after all are receding, the worse for the euro and better for the dollar.
Australia does not change interest rates
Just a few months ago, it was expected that 2024 would start with a series of interest rate cuts. Currently, however, we have something that was referred to by the NBP president in Poland as a plateau. Although this applied to inflation, in the case of interest rates, this reference seems better because the chart might actually look like it. The Royal Bank of Australia did not change interest rates last night. However, remember that inflation in Australia has just recently fallen below the level of interest rates. So it’s not surprising that they are not yet being lowered. Many economies experienced a yo-yo effect in the case of strong drops. This cannot be ruled out here as well.
Today, there are no significant macroeconomic data readings in the calendar.
Maciej Przygórzewski – chief analyst at InternetowyKantor.pl and Walutomat.pl
