Anticipation that the statement from across the ocean would be more important than the decision turned out to be correct once again. Investors now have a lot to consider ahead of the September meeting. In Poland, prices have not grown quite as dramatically.
FOMC’s Decision Did Not Surprise the Markets
Yesterday’s FED meeting can be divided into two parts. The first part held no surprises. As expected, interest rates were left unchanged. However, in the second part emerged a surprising statement that it would not be appropriate to lower interest rates until there is certainty that inflation is persistently heading towards 2%. At present, however, we have 3% and a decidedly sideways trend. The market is currently in disarray. On one hand, futures contracts continue to suggest a fall in interest rates in September. On the other hand, investors have started buying dollars as if interest rate cuts were drifting away. Apparently, investors are playing with the scenario that by the end of the year we will see one, at most two, interest rate cuts of 0.25%, and not three as previously believed. The tremor was also noticeable on the stock exchanges, where the end of the day marked a clear discount. Higher interest rates mean worse company results.
Other Data from the USA
Wednesday wasn’t only about the FOMC meeting. Everyone was waiting for it, but we also saw a package of crucial data beforehand. It started with a weaker ADP report, which was significantly weaker than expected. The Chicago PMI index performed slightly better. Additionally, weaker data from the labor market was cushioned by a better-than-expected index of signed home purchase agreements. However, due to the Fed meeting at the end of the day, investors waited with their reactions, hence despite the fact that weaker labor market data should have led to a downgrading of the dollar, the movement was relatively small.
Inflation in Poland Skyrocketed
Although everyone knew that the actualization of energy prices would not take place painlessly. But we all hoped for better. The 4.2% result may look dramatic, but it is important to remember that the market expected 4.4%. Most of this change compared to the previous month, when inflation was at 2.6%, is attributed to energy costs. This is actually good news as it shows that the structural problem is not that big. However, since electricity prices increased in July, there is a chance we will see secondary shocks on other markets, as not all prices will rise immediately. What does this mean for the Zloty? Lower inflation theoretically speeds up interest rate cuts. In Poland, however, they are so far away that they don’t affect the currency.
Today in the macroeconomic calendar, attention should be paid to:
13:00 – UK – Bank of England’s interest rate decision,
14:30 – Czech Republic – Czech National Bank’s interest rate decision,
14:30 – USA – Unemployment assistance applications.
Maciej Przygórzewski, the chief analyst at InternetowyKantor.pl and Walutomat.pl
The post “Fed Surprised with Statement” first appeared in CEO Magazine.
Source: https://ceo.com.pl/fed-zaskoczyl-komunikatem-30502
