For several days we observe the impressive rally of the dollar. However, the market can now look forward to a correction on the US currency, especially that today will speak the President of the Fed, which is known for her cautious assessment of the economic situation.
Movements in the market since victory of Donald Trump in the presidential elections were driven by expectations of more fiscal stimulus from Washington. Also, such a vision liked the representatives of the US Federal Reserve, who had already called for greater government involvement in the stimulation of economic growth. The market took it as a harbinger of more steep path of rate hikes by the Bank.
Therefore, investors are almost certain that in December comes to monetary policy tightening in the US, as well as chances for the further normalization in the coming months, which of course translates into higher yields of US bonds, as well as the appreciation of the dollar. But here we can find a lot of risks. Reforms of the new administration in the White House can begin to act not quicker than in the second half of next year. Moreover, looking at the short term, today will take place a speech of president of the Fed, Janet Yellen before Congress, where she will speak precisely on the topics related to the outlook for the US economy. FED’s chair testifies before the Congress or some of its Committees to explain the current economic situation and the policies applied to improve it. After the testimony, a Q&A session follows, which can imprint strong volatility across the board.
Previously, her comments were often perceived as negative for the dollar and led to its depreciation. Therefore, the market will be particularly attentive, and will watch how she will refer to the potential effects of fiscal reforms proposed by Trump, as well as the post-election reactions, including rising bond yields. In addition, it will be important whether she will share view of her colleagues from the Fed that a rate hike in December is almost certain. In addition, it will be important how will she comment the issue of central bank independence. We must remember that during the election campaign, President-elect negatively evaluated the work of Yellen and Fed policy. About 14:30 we will have data on US inflation for October. If the readings do not meet expectations, the pressure on the weakening of the dollar will also increase.
Gold, like other emerging currencies, keenly felt the global sale of bonds. Interestingly, based on this factor, it seems that the Polish currency has still potential for further weakness. In addition, we have negative signals coming from national economy. The increase in the third quarter was miserable, and government policy also does not help. Adoption of lowering of retirement age does not build confidence among investors, which increases the pressure on Polish assets. Before 10:00 USDPLN costs 4.1468, EUR 4.4430 PLN, CHFPLN 4.1411 and 5.1614 GBPPLN
