Dollar Holds Strong, Stable PLN, and Falling Commodity Prices

The attempt to initiate a correction on EUR/USD has ended in failure, as arguments continue to favor the American currency. Consumer inflation in Poland for October is in line with forecasts. Crude oil prices are still under “selling” pressure.

Sisyphean work at the edge

The last hours of trading on the FX market are dictated by the rebound of the world’s main currency pair. After reaching a minimum of 1.0495, quotations are trying to head north and initiate a correction. However, there is still no talk of a trend change, especially since the rate has not dropped to the support level around 1.0450. Arguments for the dollar in pair with the euro still dominate. And not only in the form of Trump trade – in recent hours, the topic of monetary policy has been highlighted again. For some time now, together with the Fed, the phrase of a neutral interest rate has emerged, which – as representatives of this body claim – is close to the current one. This means nothing more or less than further cuts are in question. This position was also confirmed by Powell during yesterday’s performance. And it’s hard not to agree with the arguments for keeping the rates. There is talk of a strong economy, higher recent inflation, and uncertainty about Trump administration actions. Markets are increasingly concluding that there may not be a December cut. This is shown by the decreasing probability of a move reducing the cost of money by 25 basis points – from nearly 80% to 62% today. In the short term, the dollar, as can be seen in the indicators, shows selling out. However, the above arguments constitute a strong argument so that the trend does not change. It seems that the issue that may affect the change in attitude will probably only be a series of labor market data, and slightly later, further inflation signals from the USA.

PLN – it’s not as bad as it might seem

The domestic currency has been somewhat weaker recently, however, especially in relation to the euro, we see signs of stability. The exchange rate has not broken through resistance at the level of 4.37, so theoretically at this point, the route to 4.40 has been closed. We also see a 5-cent drop on USD/PLN since yesterday from the level of 4.1330 to below 4.09, along with the rise in the world’s main currency pair. Today we saw the CPI inflation reading from our economy for October. There were no surprises, and the result of 5% turned out to be in line with predictions. In September, the price level was 4.9%, so we see a slight increase. After the reading itself, we saw a momentary nervous reaction to PLN. The rate in relation to the euro or the dollar spiked a few cents down, and then returned to basic values. Higher inflation at the level of 5% casts doubt on the rate cut in our country in the first half of 2025. And if the world’s main central banks drop anchor in easing, it may turn out that for the entire next year, borrowers in our country will not feel the relief.

Commodities are getting cheaper

We see considerable corrective moves on commodities in recent days. Gold, silver or copper, but also crude oil, recorded drops. WTI is falling below the level of 68 USD per barrel and it must be admitted that the coming days may not necessarily mean a rebound. The Trump trade works to the disadvantage of oil quotations, as the announcement of raising tariffs on goods from China may slow economic growth worldwide, which will negatively affect the demand for crude. On the other hand, OPEC is adding its own negatives, planning to loosen restrictions and go full steam with production. The clash of lower demand with a large supply can only mean one thing, namely pressure to lower the price. It should be added that already now a much larger extraction is seen in the USA, Canada or Brazil, and in addition, there is noticeably lower demand in China. Analysts are outdoing each other in forecasts that the price of crude oil could even fall to USD 40.

Author: Krzysztof Pawlak, currency analyst Walutomat.pl