Yesterday brought both new highs and a brief calming of emotions around the US dollar. Today, the Monetary Policy Council (RPP) meeting will take place. The market expects interest rates to remain unchanged.
Dollar at Its Cheapest Since 2018
Yesterday’s data from business climate indices did not surprise the markets. In the eurozone, there is still a certain reasonable pessimism. The reading of 49.5 points is slightly below the equilibrium level, but only marginally. It is just 0.5 points short of 50, which would balance positive and negative responses. However, it is worth noting that the situation in the Old Continent is steadily improving. Yesterday’s reading was the sixth consecutive indication of rising optimism. This shows that the initial fears about confrontation due to the trade war with the new US administration were somewhat exaggerated. On the other hand, better data from Europe is another signal attracting investors’ attention to our side of the Atlantic. For this reason, we saw a continuation of the move from the dollar toward the euro yesterday.
Data from the USA
Afternoon data somewhat calmed the situation. After local business indices had recently failed to impress positively, many feared the overall index would also be disappointing. However, there was a surprise here. Both the PMI and ISM reports for manufacturing exceeded expectations. Considering the preceding days, the effect was even stronger. As a result, yesterday the pressure on the dollar eased somewhat in the latter half of the day. This does not mean the dollar is strong again — just that the weakening movement has slowed. These data were complemented by a higher-than-expected number of job vacancies, which may suggest a potential improvement in the US labor market.
Waiting for the RPP
Today is the Monetary Policy Council meeting. The most likely scenario is that interest rates will remain unchanged. There is also a proposal by Professor Joanna Tyrowicz to raise rates by 2%, but this realistically has almost zero chance of passing. A rate cut at today’s meeting seems somewhat more probable, though markets do not expect this, as reflected by WIBOR rates. These suggest that changes would likely happen earliest in September. However, surprises have happened before.
Important Macroeconomic Data Today:
- 14:15 — USA — ADP Employment Report
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
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Source: ceo.com.pl
