In the last couple of weeks we follow the same scenario. Global markets copy the trends established by the US equities markets. Since the largest economy in the world is experiencing the sub prime mortgages market crisis, declines of benchmark indices are on a normal turn of events. Currencies react also mainly to macroeconomic news from the United States and to risk aversion of investors.

Until interest rates in the US are announced on September the 18^th, investors need to focus on other important publications. On Tuesday the Trade Balance for the US will be published. The slowing economy is causing the US trade deficit to extend. Also on Tuesday, Fed’s Chairman, Ben Bernanke and European Central Bank’s Chairman, Jean-Calude Trichet will give speeches. Investors will be anxiously waiting to hear news regarding the short-term monetary policy of the Fed and the ECB. Investors playing on the Swiss franc will certainly be focusing on Thursday when the Swiss central bank will announce the level of interest rates in Switzerland. Most analysts expect an interest rate hike by 25 basis points to 2.75% although the Swiss central bank often times follows the ECB’s monetary policy. Since the ECB kept interest rates unchanged in the Euro zone at 4.00%, it possible, despite forecasts, in Switzerland the situation will remain unchanged too. Thursday’s decision of the Swiss central bank is very important to Polish citizens, since many of them take credits denominated in the Swiss franc. A possible interest rate hike will increase the monthly rate they need to pay. The Polish Zloty will follow the direction of the main currency pair in the world. An increasing risk aversion will cause investors to cash their investment in Poland. Increasing confidence, with improving economy, will strengthen the PLN, still considered a risky investment.

The most important macroeconomic publication will be announced on Friday in the US. Investors will be certainly paying attention to the Core Retail Sales, Industrial Production, and the University of Michigan Consumer Sentiment reports. Readings worse than expected can certainly push the USD and the US indices down. Last Friday’s non-farm payrolls publication caused the EURUSD to rally all the way to 1.3796. The anti-dollar mood of investors, with worse news from the US economy can make the EURUSD to chase its all-time high at 1.3853. An interest rate decrease by the Fed will make very possible for the euro the reach a new record all-time high. Stock indices are on the decline too. The Dow Jones Industrial Average, which finished the week at 13,108, is close to an important support level at 13,027. The S&P 500, ending the week at 1,452.8, is in close proximity of 1,431. If both indices break their support levels, further declines are almost certain. The Polish WIG 20 dramatically declined after the non-farm payrolls report in the US was published. The WarsawStock Exchange’s blue chip index oscillates around 3,461, an important support level. Monday’s session should confirm which direction the index will move. Falling below 3,460 will certainly be a signal for further declines.

Adam Narczewski