The zloty is recovering losses. Investors are waiting for interest rate decisions

The Polish currency makes up for Monday's losses. Investors are waiting for tomorrow's results of the Monetary Policy Council meeting, but even more for next week's decisions Fed i ECB on interest rates. They will decide at what levels Polish couples will finish 2022.

The zloty is recovering losses

On Tuesday, the zloty strengthened against the main currencies, correcting its sell-off from Monday, caused by surprising data from the US and the dollar's strengthening provoked by it. Today the FX market is relatively calm and investors are waiting for new impulses. More for next week's meetings of the US Federal Reserve (Fed) and the European Central Bank than tomorrow's results of the meeting of the Monetary Policy Council (MPC).

At 11:23 a.m. the euro fell by PLN 1,6, going back to PLN 4,6952, after the single currency gained PLN 3,3 on Monday. The dollar was cheaper by PLN 1,8 and PLN 4,4710 had to be paid for it, after yesterday's increase by PLN 4,7. The Swiss franc fell by PLN 2 to PLN 4,7446, after yesterday's increase by almost PLN 2,9.

EUR / PLN daily chart. Source: Tickmill

Yesterday's depreciation of the zloty was triggered by a surprisingly good ISM index reading for the US services sector (56,5 pts vs. forecast: 53,1 pts), additionally supported by better than expected data on industrial orders (1% vs. forecast) : 0,6% M/M). This again aroused fears of large interest rate hikes by the Fed, becoming an impulse to strengthen the dollar and increasing risk aversion in the global markets, which backfired on the Polish currency on Monday.

The market is waiting for the Fed meeting

Today, concerns about the Fed's policy have calmed down, which allows the zloty to partially recover from Monday's losses. However, the FX market will be sensitive to new impulses coming from the US and will be eagerly waiting for next week's Fed meeting. For the zloty, this will be a much more important event than Wednesday's meeting of the Monetary Policy Council, which beyond any doubt will leave interest rates unchanged (the main rate at 6,75%), further confirming the market's belief that the cycle of hikes in Poland has already ended. The CEO's press conference scheduled for Thursday should not cause much emotion NBP, which will certainly fit into this narrative about waiting for the effects of the previous increases.

From the point of view of the zloty quotations at the end of the year, the next important factor, next to the Fed, will be the scheduled date  December 15 meeting of the European Central Bank. Therefore, we can risk a thesis that in anticipation of next week's Fed and ECB meetings, the zloty will be relatively stable in the second half of the week.