While awaiting the FOMC's statement on interest rates in the evening, the pace of GDP growth in the USA in the Q3 was published. It was higher than expected, growing by 1.9% quarter-on-quarter. The first part of the day has been calm on the currency market, but still today, it is possible that the volatility range will increase significantly.
The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.
7:00 p.m.: FOMC's statement (estimates: interest rate cuts by 25 basis points - to the range of 1.50-1.75%).
The US economy has not slowed down as economists expected
The Federal Reserve in the USA is in the spotlight today. This evening, the Monetary Committee (FOMC) will present a statement after the two-day meeting. It is almost certain that the rates will be cut by 25 basis points. However, this tone of the message will be important for the market. The US economy is still in a relatively good condition, particularly in relation to the eurozone. Therefore, the cut will not be driven by internal factors, but by external factors. The domestic situation does not justify lowering interest rates, and trade negotiations between China and the USA, which were the main element of uncertainty, seem to be moving in the right direction.
As a result, a so-called "hawkish cut" can be observed. FOMC will be cautious in communicating further rate cuts, which may be considered by the market as a positive sign for the dollar. However, the final reaction will probably take place at the end of the week, or even later. On Friday, the key report from the US labour market will be published. In theory, the publication may change sentiment after the FOMC statement, given the relatively small growth of new payrolls and a slight slowdown in the growth pace of average wages in the USA. However, this may already be taken into account, and the reaction to today's FOMC statement will most likely not be final.
The anticipation around the FOMC events in the evening is reflected in a relatively limited fluctuation range affecting the major currencies. The EUR/USD exchange rate continues to fluctuate around 1.11, and only evening events can trigger more movement.
The preliminary data on the growth pace of the USA's GDP in Q3 were published. The US economy grew at a pace of 1.9% (annualised). This is 0.3 percentage points above the market expectations, which caused a slight increase in the dollar's value. However, any kind of reaction is likely to be somewhat limited until the FOMC statement. ADP also published data on employment in the non-farm sector in the USA in October, which increased by 125,000, 5,000 above the consensus. However, the September data were revised downward: from 135,000 to 93,000, which may slightly limit the dollar's growth potential.
How will the zloty react to events in the USA?
Only minor changes were observed on the zloty. In the morning, the EUR/PLN exchange rate set new three-month lows at around 4.2600, and the USD/PLN exchange rate moved between 3.83 and 3.84, also close to the three-month lows. If the aforementioned "hawkish cut" is realized and the dollar appreciates, the EUR/PLN pair may appreciate and be close to 4.2850 and the USD/PLN pair near 3.9000 boundary.
This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.
While awaiting the FOMC's statement on interest rates in the evening, the pace of GDP growth in the USA in the Q3 was published. It was higher than expected, growing by 1.9% quarter-on-quarter. The first part of the day has been calm on the currency market, but still today, it is possible that the volatility range will increase significantly.
The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.
The US economy has not slowed down as economists expected
The Federal Reserve in the USA is in the spotlight today. This evening, the Monetary Committee (FOMC) will present a statement after the two-day meeting. It is almost certain that the rates will be cut by 25 basis points. However, this tone of the message will be important for the market. The US economy is still in a relatively good condition, particularly in relation to the eurozone. Therefore, the cut will not be driven by internal factors, but by external factors. The domestic situation does not justify lowering interest rates, and trade negotiations between China and the USA, which were the main element of uncertainty, seem to be moving in the right direction.
As a result, a so-called "hawkish cut" can be observed. FOMC will be cautious in communicating further rate cuts, which may be considered by the market as a positive sign for the dollar. However, the final reaction will probably take place at the end of the week, or even later. On Friday, the key report from the US labour market will be published. In theory, the publication may change sentiment after the FOMC statement, given the relatively small growth of new payrolls and a slight slowdown in the growth pace of average wages in the USA. However, this may already be taken into account, and the reaction to today's FOMC statement will most likely not be final.
The anticipation around the FOMC events in the evening is reflected in a relatively limited fluctuation range affecting the major currencies. The EUR/USD exchange rate continues to fluctuate around 1.11, and only evening events can trigger more movement.
The preliminary data on the growth pace of the USA's GDP in Q3 were published. The US economy grew at a pace of 1.9% (annualised). This is 0.3 percentage points above the market expectations, which caused a slight increase in the dollar's value. However, any kind of reaction is likely to be somewhat limited until the FOMC statement. ADP also published data on employment in the non-farm sector in the USA in October, which increased by 125,000, 5,000 above the consensus. However, the September data were revised downward: from 135,000 to 93,000, which may slightly limit the dollar's growth potential.
How will the zloty react to events in the USA?
Only minor changes were observed on the zloty. In the morning, the EUR/PLN exchange rate set new three-month lows at around 4.2600, and the USD/PLN exchange rate moved between 3.83 and 3.84, also close to the three-month lows. If the aforementioned "hawkish cut" is realized and the dollar appreciates, the EUR/PLN pair may appreciate and be close to 4.2850 and the USD/PLN pair near 3.9000 boundary.
See also:
Brexit postponed, pound stable (Daily analysis 28.10.2019)
Calm Tuesday on the market (Afternoon analysis 23.10.2019)
Brexit - still no decision (Daily analysis 21.10.2019)
Calm Friday (Daily analysis 18.10.2019)
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