The main macroeconomic events of the current week that could significantly affect exchange rates were central banks’ decisions on interest rates. The Monetary Policy Council announced, on Wednesday, raising interest rates to the highest level in 21 years. As a result of raising interest rates by 0.75pp. On Wednesday, the zloty rose 0.86% against the US dollar and 0.57% against the euro.
EUR/PLN, FOREX, YTD, Source: baha.com
Wednesday’s Federal Reserve meeting did not significantly affect the dollar. No announcement of a planned rate hike and the announcement of a $15 billion in asset purchase reduction per month was an expected scenario. The dollar lost 0.28% against the euro during the session. Thus, the EUR/USD exchange rate closed above 1.16.
During the Thursday session, the EUR/PLN and USD/PLN exchange rates returned to the upside. During the trading hours, the dollar approached the PLN 4.00 and was above 3.99, rebounding at the session high by 1.23% compared to the closing price of the Wednesday session. The EUR/PLN exchange rate has temporarily broken the 4.60 barrier.
USD/PLN, FOREX, YTD, Source: baha.com
Wednesday’s rate hike did not translate into an immediate reversal of the Polish currency’s bearish trend. Although there are no announcements announcing further decisive actions in the area of monetary policy, it can be assumed that the pressure of lowering inflation to the 2.5% inflation target with a possible deviation of 1 percentage point will force the MPC to make further rate changes. rates. The result of Wednesday’s rally and the possibility of subsequent hikes may strengthen the zloty exchange rate in the long run, however, the main factors in this will be future inflation readings and developments related to the escalation of the conflict between Poland and the European Union. .
On Thursday there was a meeting of the Bank of England which kept interest rates at 0.1% despite rising inflation. Many analysts have assumed an increase in the reference price of 15 basis points. or 25pb. So the lack of intervention was negatively met by the market. The Bank of England’s decision caused the pound to fall during the Thursday session by 1.35% against the US dollar and 0.88% against the euro.
On Wednesday, October 6th, we saw a surprise move from the MPC in interest rates (40bp up to 0.5%) and received the statement after the meeting. However, the market has not received an answer to the main question of whether the increase in the cost of money is a one-time movement or the beginning of a cycle of increases. l.. read
The exchange rate of the US dollar against the Polish zloty at the beginning of the Friday session was 3.9833 and it strengthened. The valuation of the euro against the Polish zloty also reacted in the same way. Prices are down 0.2%.
Daniel Targoz, Superfund TFI, 2021.11.05
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