On the currency market, the British pound seems to stand out in particular, with its exchange rate shooting up after comments from the Governor of the Bank of England. He stated that there are still some issues regarding the introduction of negative interest rates, making it clear that this will not happen too soon.
As a result, the interest rate market, which was expecting a rate cut at the upcoming meetings, had to shift its expectations all the way to December 2021. It seems that the British pound may have benefited from this. The GBP/USD pair once again approached the potential resistance in the area of 1.3700. The Bank of England might not introduce a negative interest rate at all, as it would threaten the banking business, but it might also not be justified, as the economy is expected to recover already in the second half of 2021.
If the consequences of brexit are not that severe and the UK gets over COVID-19 thanks to relatively quick graft, it is possible that the GBP would be one of the stronger currencies in 2021. It's hard to expect anything worse to happen for this economy than the combination of an outbreak and divorce from the EU in one year.
What will the Polish MPC decide?
It is rare for a decision of the National Bank of Poland, or rather the Monetary Policy Council, to attract as much attention as the one expected today. Recent statements by the NBP President Adam Glapiński indicated that an interest rate cut at the beginning of the year was not out of the question. Nevertheless, verbal intervention seems to have been the main objective, which has helped the zloty retreat and is also helping to reduce interest rates on Polish debt.
A reduction from 0.1 percent to 0.0 percent seems unlikely without another wave of illnesses and more severe restrictions on the economy. The market is also focused on comments to the zloty as part of the NBP's statement after the December currency intervention. The currency intervention seems to have been undertaken to prevent the appreciation of the zloty and to support exporters, but also to avoid NBP losses on foreign exchange reserves. Hence, it is also unlikely that intervention would occur in the near future.
The key for the EUR/PLN exchange rate may be the area around 4.50. The institutions are afraid to buy the zloty below this level so far – according to market participants. In addition to the decision itself, the announcement after today's MPC meeting seems to be important, especially mentions concerning the PLN.
In the morning, the dollar was at PLN 3.71, the euro was at PLN 4.52 and the British pound at PLN 5.07.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
76.44% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
