Currency report: Eyes on the US market

The markets remained calm at the beginning of the week, awaiting the Fed's decision on what should be done with interest rates to help the US economy awaken from the deep crisis it is in.

The Fed's decision to lower interest rates by 25 basis points appeared to surprise many, especially those who expected a 50 basis-point drop. The reaction of the US dollar was instantaneous - it increased in value just after the announcement, which continued to the end of the week.

The Polish economy also awaited significant information with regard to the domestic Consumer Price Index, which increased by 3.6 percent in November against an expected increase of 3.4 percent. This is a signal that will probably drive the Monetary Policy Council to increase rates next year, which may even go higher than 5.5 percent.

A response to this will probably be produced at the beginning of 2008. As for the week of December 17-21, I believe that investors will experience a calm week with the likelihood of a slight weakening of the złoty against both the dollar and the euro.

Omar Arnaout

X-Trade Brokers Dom Maklerski SA