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Weekly Currency Brief

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Interest rates in the spotlight

Fri, Oct 9 2009, 13:40 GMT
by Adam Narczewski

X-Trade Brokers, XTB

After the previous week’s decreases, financial markets regained some ground and bounced back. It seems that investors ignored bad macroeconomic news from the U.S (especially experiencing hard times the labor market) at least temporarily. This past week was not rich in macro publications so markets looked for other impulses. The only report that made difference was Monday’s U.S ISM-Services publication, which increased to its highest level since 2008 (reading at 50.9 points). Risk aversion decline and markets began its way up. It has to be mentioned that the quarterly reports publication season has started on Wednesday in the U.S and Alcoa (aluminum producer) showed better than expected results. On Thursday both the ECB and the Bank of England kept interest rates unchanged at 1% and 0.5% respectively. Such decisions were expected by analysts not like the decision of the Bank of Australia, which increased interest rates by 25 basis points (to 3.25%) as the first of the developed countries. Increasing stock markets are not good news for the U.S dollar, which keeps depreciating. The EUR/USD increased from $1.4610 to $1.4730 throughout the course of the week.

This past week the Złoty was not correlated with stock markets as usual. The Polish currency was relatively strong this past couple of weeks and needed to “adjust” to other currencies from the region (Czech crown and Hungarian Forint). Since the dollar is depreciating against all currencies, the USD/PLN remained at zł.2.88, the level it started the week. The Euro gained the most causing the EUR/PLN to increase from zł.4.2080 to zł.4.2480. The upcoming week will certainly be more volatile as more quarterly reports from U.S companies (including Goldman Sachs and Bank of America) are being published.

Published on  Fri, Oct 9 2009, 13:41 GMT