Yesterday, a historical record was set on the gold market, with an ounce reaching a value of $2141. High demand for the precious metal has been noticeable since mid-February, but the biggest gold price increases have been noted at the beginning of March. These price rises corresponded with a downward session on Wall Street. A retreat from risk bolstered assets considered to be safe, and commodity prices have also benefited from the expected rate cuts by major central banks. The context of heightened inflation is also positively influencing valuation. Today, the Monetary Policy Council (RPP) will decide on interest rates – no change is expected, with rates likely to remain at 5.75%. Meanwhile, global investors will be focused on Powell’s speech in Congress, as well as macroeconomic publications on the labor market (ADP, JOLTS).
The RPP is unlikely to surprise, and will probably maintain the reference rate at 5.75%. We will learn the new inflation and GDP projection paths in March. However, these new forecasts should not significantly influence the attitude of the “decision-making body”. The continuous increase in wages and the potential thawing of energy prices in the second half of 2024 argue for leaving interest rates unchanged. The government reassures us that severe increases are not threatening us and the poorest citizens will still be protected. It is still unclear what this protection will entail, and we will probably have to wait until April for details. As for VAT rates on food, these could return to 5% from next month. This factor will also drive up inflation in the coming quarters.
We will know two reports on the state of the US job market: according to expectations, ADP (2:15 PM) should increase to 150,000 (previously 107,000), and the number of vacancies according to the JOLTS survey should drop to 8,850,000 from 9,026,000. These data will give a hint of what we will receive on Friday (NFP). Worse data indicating a cooling off should support the narrative of faster interest rate cuts by the Fed, which should depreciate the USD and support risk appetite, causing a decrease in yields of American bonds.
Yesterday’s primaries confirmed that the most likely candidates for the presidency in the US will be Trump (Republicans) and Biden (Democrats).
The weakness of the US dollar was evident yesterday due to the ISM data for the industry. The indicator fell from 53.4 to 52.6 points. The subindex of paid prices fell significantly to 58.6 points, and employment dropped to 48 points. However, the business activity index increased (57.2 points). We also received a slightly worse than previous but better than expected PMI index (52.3 points).
The US stock market reacted to the data with declines. Nasdaq Composite lost the most (-1.7%), SP500 and Dow Jones ended the day with a result of -1%. EUR/USD rose to 1.0875, this level is being tested again today. The zloty remains strong, the EUR/PLN rate is hovering around 4.31 and USD/PLN is currently indicating 3.9645.
Łukasz Zembik Oanda TMS Brokers
