The zloty looks at the Fed. Today the FOMC meeting and a certain interest rate hike

After slightly higher volatility in the morning, the zloty against the main currencies returned to levels from yesterday's close. AND there they can stay for most of the day, waiting for the evening results of the American meeting Federal Reserve (Fed).

The zloty is waiting for the FED

At 10:20 am, the EUR/PLN exchange rate was PLN 4,6920 (increase by 0,5 PLN), CHF/PLN PLN 4,7514 (+0,4 PLN), USD/PLN PLN 4,4080 (without changes), and GBP/PLN PLN 5,4555 (+0,5 gr). However, several factors appeared on the horizon that could support the zloty today, such as media reports about large concessions of the Polish government to The European Commissionto receive funds from the National Reconstruction Plan, or the 3rd consecutive day of strengthening of the Hungarian forint, the most likely scenario is the stabilization of quotations at the current levels and waiting for the evening decision of the Fed.

The Fed meeting is Wednesday's main event and one of the main market events of the week. After yesterday's data on much lower than expected consumer inflation in the US (7,1% vs. 7,3% y/y), it gains additional importance.

What will Jerome Powell say?

The market expects the Fed to raise interest rates by 50 basis points today, thereby raising the range for fluctuations in the federal funds rate to 4,25-4,50 percent. Such a decision is already included in the valuations. As the chances of any other move by the Fed are slim, the reaction of the markets to the meeting will depend on the macro and interest rate projections released today, as well as on what Fed chairman Jerome Powell will say at the press conference. In practice, it will therefore depend on how many more interest rate hikes are suggested by the US monetary authorities, to what level and when investors see chances for the first rate cuts. The smaller the scale of monetary tightening, the better for the markets and for the zloty. And vice versa. A strongly hawkish message from Powell would spoil the moods in the markets, strengthening the dollar at the same time, which would have a negative impact on the Polish currency.

Before the decision on interest rates in the US is made, Polish data on the balance of payments will be published earlier. In October, a current account deficit of EUR 950m is projected. However, this report, similarly to data on inflation in Poland to be released later in the week, will not affect the zloty performance. These this week will mainly depend on impulses coming from the global markets. Yesterday it was inflation in the US, today the Fed meeting and on Thursday there will be decisions European Central Bank, National Bank of Switzerland i Bank of England.