USA data boosts sentiment in FX market but Fed rate cuts remain uncertain - expert analysis

Waking up to Wednesday's FX market, the strong momentum continued following better-than-expected macro data from the USA. Konrad Ryczko, an analyst at DM BOŚ, noted that the last trading hours brought about a change in sentiment due to the robust macro figures, such as JOLTs and ISM for services, which hinted at a delay in Fed rate cuts. Reminding us of the positive US data released Tuesday afternoon, including the ISM index for services and JOLTS, a broad measure of the labor market, which exceeded forecasts. PKO BP analysts echoed a similar sentiment, stating that the upbeat labor statistics in the US supported expectations of the Federal Reserve holding off on rate cuts at the upcoming meeting. The US dollar slightly strengthened against the euro, impacting the Polish złoty negatively according to PKO BP experts. It's worth noting the consumer inflation HICP in the eurozone rose to 2.4% year-on-year in December from 2.2% y/y, with core inflation remaining steady at 2.7% y/y, in line with expectations. In the country, experts predict a peak inflation rate of 5% in February, followed by a gradual decline starting from March, with a significant drop expected from July.