The decision by the Federal Reserve appears to be the most significant in this series. This, however, does not change the fact that today we will find out what the British and Turks will do, and in the early morning also the Japanese and Chinese. However, it does not seem like it will be another rollercoaster like the one after the FED.
FED Lowers Interest Rates
Yesterday, representatives of the Federal Open Market Committee, the American equivalent of the Monetary Policy Council, made the decision to lower interest rates by 0.5%. This scenario had been gaining popularity for several days, for which reason it was not a total surprise. This does not mean that it was not surprising at all, as is best evidenced by market reactions. Right after the decision, the dollar fell to the lowest levels against the euro in over a year. Gold, meanwhile, reached a record level in its history. Both these phenomena, however, did not last too long – specifically 30 minutes. Why just that long? After this time, we had the start of the FED chairman’s conference.
Conference Cools Emotions
The Federal Reserve has presented a rather strange strategy. It seems that if they see problems with the American economy and declining inflation, they would continue down this path. It turns out that they didn’t. After many months of no decision-making, they detonated a bomb in the form of a double reduction, then began to backtrack from this rhetoric. We heard that the next moves will be weaker, that they will carefully watch the data along with many other assurance clichés. The effect was that the markets first priced in an acceleration of the interest rate cuts, and after the conference, they turned completely in the opposite direction. As a result, after a depreciation of the dollar, it was time for its strengthening.
Instability Continues
The strangest part of this story is that overnight the markets thought again and concluded that the message from the FED chairman’s press conference is not so good for the dollar. As a result, today during the Asian session and early morning in Europe, we are witnessing investing in more overseas interest rate cuts. The dollar is in retreat again. There are only two pennies missing for the dollar to reach its August low against the zloty. Why are these August lows so important? Because that was the lowest level in 3 years. The last time we saw the dollar this cheap was in 2021, also in September.
Today is a public holiday in China and Japan, and in terms of macroeconomic data, attention should be paid to:
1:00pm – Turkey – interest rate decision,
1:00pm – Great Britain – interest rate decision.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://ceo.com.pl/wojna-walut-po-decyzji-fed-co-zrobia-boe-i-cbrt-29757
