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Interest rates unchanged: RPP and Canada Hold Steady, US Job Market Shows Potential Weakness

ECONOMYInterest rates unchanged: RPP and Canada Hold Steady, US Job Market Shows Potential Weakness

Yesterday’s decision on interest rates did not surprise the markets. The ADP report may suggest potential sluggishness in the local job market. Canada, like Poland, keeps its interest rates unchanged.

RPP decision did not come as a surprise

As expected, yesterday’s meeting of the Monetary Policy Council (RPP) did not result in changes to interest rates. The main rate remains at 5.75%. It’s worth noting that this is still 0.5% less than the Czech Republic and 1.25% less than Romania, not to mention Hungary, where despite a series of deep cuts, rates are still at 9%. Observing other countries in similar situations, we still have a lot of room to wait for reductions, despite the rapidly falling inflation rate. However, today’s conference has significant potential to disturb the Zloty’s exchange rates. The decline in the rate of price increases was so strong that we can expect some softening in the rhetoric of the NBP President, Adam Glapiński. If the narrative indeed changes, this would signal a weakening Zloty. Considering the recent performance and declarations of no changes until the end of the year, it seems hard to imagine any statement significantly strengthening the Zloty.

Weaker data from overseas

Yesterday we learned the result of the ADP employment report. It seems that the number of new jobs created in the USA is lower than expected. 140,000 is “only” 10,000 less than expected. However, these 10,000 proved to be sufficient reason to reach the dollar’s lowest levels against the euro since the end of January. The reason for this reaction is, of course, investors’ concerns about the condition of the American job market. Fewer jobs being created potentially signals a possibility of a coming increase in the unemployment rate.

Canada does not change interest rates

Yesterday, as analysts expected, the Bank of Canada did not change interest rates. They remained at the unchanged level of 5%. It seems that Canadian policymakers are waiting for their only land neighbor to make a move. Until the FED moves the rates, we should not expect too much. Current forecasts mention a rate cut in the USA only at the June meeting. Such a scenario would freeze interest rates for 3 months, despite inflation below 3%. However, looking at yesterday’s market reactions, some investors were already playing for a surprise, as they closed their positions after the decision, thereby strengthening the Canadian dollar.

In today’s macroeconomic data calendar, besides the RPP decision, pay attention to:

14:15 – Eurozone – decision on interest rates,
14:30 – USA – Unemployment claims,
14:45 – Eurozone – press conference after the ECB meeting,
15:00 – Poland – speech by the NBP head.

Maciej Przygórzewski – Head Analyst at InternetowyKantor.pl and Walutomat.pl

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