Three central bank meetings and May inflation data in the US

Three central bank meetings and May inflation data in the US. These will be the most important events of the starting week on the financial markets. It can be hot especially on EUR / USD and Wall Street.

By how much will the MPC raise rates?

On Wednesday, the Monetary Policy Council (MPC) will decide on the level of interest rates in Poland. Soaring inflation in Poland (in May it increased to 13,9% y / y), compared to the inflationary government spending and strongly growing wages, as well as the very fast economic growth in the first quarter of this year, which in total may indicate overheated economy suggest a large interest rate hike. And this despite the fact that the May reading of the PMI index for the Polish manufacturing sector collapsed, and the data on production in April turned out to be worse than expected. 

The market assumes that the MPC will raise interest rates by 75 basis points, raising the main rate in Poland to 6%. Such a decision should already be in prices. A higher rate hike is rather unlikely. However, it is possible that the Council will be more cautious and will raise rates by 50 bp. And this would be another signal that we are approaching the end of the monetary tightening cycle in Poland, which would certainly not help the zloty. 

Apart from the MPC meeting, an important event in the country will be the monthly press conference of the president National Bank of Poland (NBP) Adam Glapiński. Its date has not been announced yet, but it is suspected that it will take place on Thursday or Friday. At the conference, the NBP president will explain what decided about such a scale of the increase, and he will probably suggest what to do next with the cost of money in Poland. This will be the second factor that may affect the zloty performance.

The market is waiting for the ECB's announcements

On Tuesday, the rates will be decided Reserve Bank of Australia (RBA). The market assumes that it will raise the main rate by 25 basis points to 0,60%, and by the end of the year it will increase to 1,75%. 

The most important, however, will be the Thursday meeting European Central Bank (ECB). Although the market does not expect changes in the cost of money yet, as the first rate hike is only forecast at the July meeting, an official announcement of such a move should be made on Thursday. Investors will surely also listen closely to what the head of ECB, Christine Lagarde, will have to say at the press conference, looking for hints as to the rate of hikes and the target level of interest rates in the euro zone. This will be one of the two factors that will determine the EUR / USD outcome this week.

The second factor will be the data on May consumer inflation (CPI) in the US. The market forecasts inflation to remain at 8,3%. year on year, and core inflation will drop to 5,9%. from 6,2 percent in April. Possible deviations from these market forecasts will be treated either as a signal that the inflation peak in the US has already taken place or as a signal that inflation remains a big problem, which will make the Fed determined to raise rates strongly. The latter interpretation is favorable for the dollar and unfavorable to Wall Street and other global stock markets.