Changes at the Fed. Official statement released
Jerome Powell ended his four-year term as Chairman of the Federal Reserve on Friday.
At the same time he was assigned the role of interim Chairman of the Board of Governors until the central bank’s leadership is taken over by his successor, Kevin Warsh.
"This transitional action of appointing the current Chairman to the position of interim Chairman is consistent with past practice used during similar changes in the Chair’s position," the Fed statement said.
According to Bloomberg, the Federal Reserve spokesperson declined to comment on when Warsh might be sworn in.
Significantly, his candidacy generated a lot of uncertainty, ultimately reflected in a vote result of 54:45.
The narrowest margin in the history of approving the central bank’s chairman became an example of growing political polarization regarding whether Warsh will succumb to Donald Trump’s pressure to cut rates quickly.
The commentary on this matter in the FXMAG interview was provided by Maciej Przygórzewski, chief currency analyst at Currency One, operator of Internet services Internetykantor.pl and Walutomat.pl.
It seems to me that Kevin Warsh’s expectations at the start of this year are already long outdated. Forward rate contracts already now show that by the end of 2027 the chance of a cut in a single meeting exceeds 10%. The chances of hikes are much higher.
Reasons can of course be indirectly linked to the war in the Middle East, but everything boils down to inflationary pressure. Prices in the USA are rising faster than in Western Europe. The pressure from producer costs is particularly evident, showing that it will soon translate into consumer prices as well.
"The most likely scenario in which rapid rate cuts could occur is strong political pressure related to the upcoming elections", the expert said.
"Cutting rates now is a straight path to future disaster," he added.
The federal funds rate, the last decision by Jerome Powell as Fed Chair, was kept in April in the range 3,5%-3,75%.
The next Fed meeting will take place on 15-16 June.
Source: CME FedWatch Tool.
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Dollar and euro rates on Monday, May 18
The dollar to zloty rate on Monday, May 18 is at 3,65 PLN.
Maciej Przygórzewski presented current forecasts for the currency market for May, taking into account the current geopolitical situation related to the conflict in the Middle East.
"In my opinion, the euro at 4,23-4,25 PLN is a good forecast. If a ceasefire and peace in the Middle East occur, it could even be 4,20 PLN. In case of escalation, it would likely be around 4,28 PLN, and for a land invasion above 4,30 PLN", he informed.
In the case of the dollar, the spread is much wider. The midpoint of the range should be around 3,60-3,63 PLN. The closer we get to peace with Iran, the more it will move towards 3,55 PLN, and if Israel ends operations in the region, even lower.
On the other hand, if the conflict continues, capital inflows to the dollar should be expected. Both from fear and rising expected interest rates. Then the level 3,70 PLN would be closer. Greater increases should be expected in the case of a land invasion of Iran.
"Somewhere in the background are still US-China talks. If the US ultimately trades Taiwan’s security, it should be a signal weakening the zloty even by a few cents", he added.
Chart. Dollar to zloty rate (USD/PLN)
Source: TradingView.
The euro to dollar rate reaches 1,16 USD.
Chart. Euro to dollar rate (EUR/USD)
Source: TradingView.
The euro to zloty rate oscillates around 4,24 PLN.
Chart. Euro to zloty rate (EUR/PLN)
Source: TradingView.
Read also: Dollar before a chance to break out? Expert: “Capital will flow back to USD”
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Source: Bloomberg.
