The main news today revolved around Thomas Jordan, who in his farewell as president of the Swiss National Bank, caused quite a stir in the market by lowering interest rates. In addition, OPEC member Saudi Arabia is changing its oil extraction strategy, and surprisingly, the Czech Republic also reduced their rates.
As per expectations, Switzerland lowered its key interest rates today, with the main rate dropping from 1.25% to 1%. The Swiss National Bank also intended to weaken the currency. This move comes at Jordan’s last meeting as president, after serving in this position for 12 years. He will be succeeded by his deputy, Martin Schlegel.
The market’s reaction was very interesting. Prior to the announcement, the Swiss franc weakened by about two cents. Then there was an unexpected increase of 3 cents followed by another drop. This seems to suggest that some of the bigger investors were expecting a bigger move. However, additional cuts are predicted, which makes the strengthening of the Swiss franc quite a surprise.
In other news, there was some interesting data coming out of the United States regarding their oil reserves. There was a decrease of 4.47 million barrels, despite speculation of only a 1.2 million drop. This greater than anticipated demand should in theory drive up oil prices – instead, we saw the value of the commodity decrease.
This anomaly can be explained by a bit of information shared by Financial Times. Apparently, Saudi Arabia is planning to abandon its goal of raising the price of a barrel of oil to $100. Instead, they intend to focus on increasing their market share, which will most likely result in an increase in oil production. It’s worth noting that the country has very low production costs, which puts them in an advantageous position when engaging in a price war with other oil producers.
Our neighbors to the south, the Czechs, are primarily in the news due to the natural disaster that has also affected our country. However, yesterday the prominent news out of Prague – at least in financial markets – was a decrease in interest rates. The Czechs have already reduced the main rate to 4.25%. At the peak of interest rates, the Czech Republic was a quarter percentage point above Poland. Now they are one and a half percentage points lower. The decision was anticipated and hence the Czech crown market remained on similar levels as before the announcement, bar some increased volatility around its publication time.
Maciej Przygórzewski – chief analyst at InternetowyKantor.pl.
Source: https://ceo.com.pl/thomas-jordan-zegna-sie-z-fotelem-prezesa-szwajcarskiego-banku-obnizka-stop-saudyjczycy-zmieniaja-strategie-ropy-47345
