Dawn: Sweden sent rates down yesterday, Great Britain and Poland will keep them today. The koruna strengthened at 25.00 to the euro

Yesterday, the Swedish central bank became only the second monetary authority in the developed world, after its Swiss colleague, to reduce interest rates in this business cycle. The Riksbank’s main rate was reduced by 25 basis points to 3.75% today.

Recall that Swedish inflation is close to the target, while economic activity is weak, allowing the central bank to pursue a less restrictive monetary policy. If the favorable outlook for inflation persists, the key interest rate is expected to be cut twice more during the second half of the year. The gradual reduction is justified due to the uncertainty surrounding the outlook. Let’s add that at the moment the money markets are discounting another rate cut of 25 basis points for the August meeting.

The show of central banks in Europe will continue today, specifically in Great Britain and Poland. In the case of these countries, however, the rates will not change (as, for example, yesterday in Norway). However, the mood of the Bank of England and Polish NBP management is very different. While the management of the BoE will probably prepare the market for a possible rate cut as early as June, nothing of the sort can be expected from the Monetary Policy Committee in Poland. Meanwhile, official interest rates are currently higher in Poland than in the UK (5.75% vs. 5.25%), while the year-on-year inflation rate is lower (2.4% vs. 3.2%). Not coincidentally, then, the looming dovish appetites of the Bank of England forex markets value the weakening pound, while the zloty is rock solid thanks to the hawkish obstinacy of the NBP.

*** MARKETS ***

Crown
The koruna is experiencing a rather uninteresting week, stubbornly holding close to the 25.00 EUR/CZK level. Even the surprisingly weak result of industrial production for March, which points to a continued slowdown in activity, did not change anything. Today, the statistics office will publish figures for March retail sales, which should offer a more optimistic picture thanks to renewed growth in real incomes and improved consumer sentiment.

Eurodollar
With the exception of a few comments from central bankers, the Eurodollar lacked any excuse to move yesterday. Rather than secondary events in the US or the Eurozone, events on other major foreign exchange markets may be interesting for the Eurodollar. On the one hand, the Japanese yen is still under pressure, possibly waiting for another supportive intervention from the Bank of Japan, and on the other hand, the British pound is weakening ahead of today’s Bank of Japan meeting. Both can make the dollar stronger globally, which can indirectly push the Eurodollar lower.

Stocks
US stock markets were looking for direction for most of the day yesterday. Only the Dow Jones was in the green, while the tech-heavy Nasdaq 100 fell for most of the day. Lyft pleased its investors with earnings, revenue and outlook for 2Q above analysts’ estimates, Uber reported a loss for 1Q instead of an expected profit and was not enthusiastic about the outlook for this quarter either. As a result, Lyft shares added around 7%, while Uber shares lost over 5%. Intel kept its revenue estimate for the quarter in the $12.5-$13.5 billion range, but now expects it to be in the lower half of the range. The management of this company responded to news from the US Department of Commerce, which canceled export licenses for a selected client in China. Intel shares fell 2%.