Today’s data from the US job market have dramatically shaken the currency exchange rates across the ocean. The Swiss maintain the level of consumer inflation. The Czechs for the sixth time lower their interest rates.
Data vs Technique
An extremely interesting situation is taking place on the “edku”, where technically for the last two weeks we remain in a downward trend. Yesterday’s resistance in the form of the downward trend line once again became a brake on the deprecation of the dollar against the euro. This took place after recessionary PMI and ISM readings for the industry.
However, today, after data from the US job market, the resistance didn’t hold up. Lower than expected changes in employment, both in the non-agricultural sector and the private sector, combined with an increase in unemployment from 4.1% to 4.3%, sharply weakened the dollar. These are serious arguments for the FED to lower interest rates, as Jerome Powell mentioned on Wednesday. This is indicated, for instance, by a 190-degree change in forecasts for interest rate cuts in the US. According to the FedWatch Tool, the probability of a September lowering by 50 b.p. is 66%. Remember that just yesterday there was one reduction. The yields on US bonds, where the two- and ten-year bonds fell below 4%, are also interesting. At the time of writing, the yield on 10-year bonds is 3.82%. The EUR/USD exchange rate at 15:00 reached 1.09 USD (in the morning it was 1.079 USD).
Like in a Swiss watch!
For over a year now, the Swiss have been maintaining inflation at the goal of the Swiss National Bank, which is a range from 0 to 2%. Today’s consumer price dynamics readings were exactly as expected. In annual terms, prices rose by 1.3%, while compared to the previous month, a decrease of 0.2% was recorded. Data consistent with market consensus did not lead to volatility on the franc charts, which – as a so-called safe haven – has recently been strengthening in the broad market. This is, of course, connected with the escalation of tensions in the Middle East. On Friday at noon, the CHF/PLN rate remained above the support of 4.54 PLN, reaching sometimes to the local maximum of 4.57 PLN.
CZK strengthening despite rate cuts
The Czechs continue the cycle of interest rate cuts. Yesterday, south of our border, the cost of money fell from 4.75% to 4.50%. The move was in line with expectations and amounted to 25 basis points. This was very important for the markets. Why? Firstly, the previous four reductions were twice as large (50 b.p.). Secondly, we remember how a month ago experts expected a single move (of 25 b.p.), and the Czech National Bank surprised with a double move. The fact that investors appreciated the July “no surprise” is evidenced by the behavior of the Czech koruna, which, despite the rate cut, has strengthened against the euro, dollar, or zloty. The CZK.PLN rate reached the level of 0.17 PLN. On Friday, we observe a slight reaction to yesterday’s move.
Author: Dawid Gorny, currency analyst at Walutomat.pl
The post “Pivot” FED in September already! first appeared on CEO Magazine.
Source: https://ceo.com.pl/pivot-fed-juz-we-wrzesniu-93935
