USD Seeks Stabilization After Weakening – No Surprises from Chinese and Turkish Central Banks

Tuesday’s forex trading is seeking stabilization after the opening of the week, which confirmed the ongoing trend of weakening USD in the broad market. The macro calendar still does not indulge, which does not help investors in their search for impulses. Today, the central banks of China and Turkey announced their monetary decisions.

USD looking for a moment of peace

August has not been kind to the U.S. dollar. Suffice it to say that this month the USD/PLN exchange rate has already lost 14 groszy. The dollar was last seen at 3.85 zł three years ago. Of course, such a strong movement in this pair would not have been possible without a clear upward trend on EUR/USD, which gained 3 cents in three weeks. Approaching $1.11, it is setting this year’s max and is increasingly eager to test the December peaks. Could an attack on last year’s peak at $1.125 be possible? It may not be so simple given the already heated market expectations of rate cuts in the US. Especially when central bankers feel too much pressure and will once again have to cool the heads of investors. The next opportunity is of course the Jackson Hole conference, topped off with the Friday speech of the Fed director. Expecting a correction by the end of the week may ultimately be wishful thinking, and today’s flat trade may only be a stop before the further weakening of the USD.

PLN seeking a spot, and gold is not stopping

The Polish zloty is seeking calm not only in the pair with the dollar. The Euro rate has not moved away from 4.26 zł since Friday, while the pound has bounced off 4.99 zł for the third time and returned above the psychological round 5 zł. A stronger counter is only visible on the CHF/PLN rate, which is returning to 4.48 zł. However, it should be noted here that this is 17 groszy less than three weeks ago. Today is not a good day for the Polish stock exchange, but the WIG20, losing 0.8%, is not so scary after yesterday’s session, which closed the gap caused by the loss after the powerful tremor at the beginning of August (currently 200 points above the bottom). Oil, after reaching a 2-week minimum, is bouncing back, and a barrel of Brent now costs nearly $78. Capital continues to flow in large streams into gold, which is setting historical records, now an ounce of gold costs over $2520.

Bankers without surprises

This time, The People’s Bank of China did not spring any surprises and left interest rates at the same level (3.85% for the 5-year rate). The surprising cut a month ago of 10 bp did not result in further moves, though the situation on the Chinese credit market remains tense. The world’s second-largest economy is facing increasing problems and will likely need further stimulation from the central bank. The Chinese yuan weakened in initial reaction, but its position quickly stabilized. Also no surprises over the Bosphorus, where the Central Bank of Turkey did not opt for a change in credit costs. Therefore, the main rate remains 50%, this may seem surprising, but only if we do not take into account over 70% inflation. At the same time, the TRY remains stable, i.e., it continues to weaken rapidly. Soon we will only pay 11 groszy for one lira.

Author: Adam Fuchs, Currency Analyst Walutomat.pl