On Monday, we learned the rate of price increases from Poland, Italy, and Germany. Unfortunately, it was only in our country that an increase in consumer price dynamics was recorded, which moreover exceeded market expectations. On the exchange rate of the world’s main currency pair, we once again observe an attempt to break significant resistance. So far, it has not been broken, but this may change later in the week when we await many important macro publications, not only from Poland, but also from the USA and the euro area.
Further Increase in Price Dynamics in Poland
On the last day of September, we got a preliminary reading of the dynamics of consumer prices in Poland. According to GUS data, the index increased from 4.3% to 4.9%, which is a 0.1 percentage point jump higher than forecasts. The rise (alongside the already known electricity price hikes) is due to the fading base effect. Let me remind you that since February 2023, consumer inflation in Poland has shown a downward trend (with a break in November). Ultimately, however, the downtrend ended only in March 2024. This means that the decreasing base will increase further readings of price dynamics in our country. This may effectively extinguish the recently more frequently raised discussions about possible first cuts in interest rates by the RPP by 2025. It is worth noting that the rebound in price dynamics in Poland takes place in an environment of falling consumer inflation in other EU countries, as last week’s data from France and Spain, or today’s from Italy and Germany showed.
Poland This Week
In addition to today’s publication, the macroeconomic calendar this week will be enriched with more important data from the national economy. Tomorrow, we will know the PMI for the industry, which is an index that studies sentiment in a particular branch. Unfortunately, forecasts talk about the decrease in its value, suggesting a recessionary phase. On Wednesday, we have the decision of the Monetary Policy Council on money cost. Consensus says to keep the reference rate at 5.75%, which seems to be an indisputable scenario, and today’s inflation readings described a paragraph earlier have only confirmed this. Usually, the day after the decision, on Thursday, the president of the National Bank of Poland’s conference takes place, and on Friday we get to know the minutes of the Monetary Policy Council from the previous session.
Leak of 1.12 on the Edge?
On the last day of September, the world’s main currency pair reached resistance indicated in the title of this paragraph. It is the third attempt this month to break it – the previous two attempts failed. Interestingly, we were in exactly the same place at the end of August. Meaning, the dollar strengthened against the euro in the first half of the month, but then gave up its gains. The recent decisions of central bankers, namely the higher-than-forecasted cuts in money costs in the USA, which weakened the dollar after September 18th, influence this situation. Furthermore, the market currently does not rule out the possibility of repeating the same move in November, which only hits the “greenback”. The story that does not adequately defend the dollar are potential earlier cuts in money cost by the ECB, which could be indicated by increasingly lower inflation readings from individual EU countries and economic slowdown in the euro area. On Monday afternoon, the resistance of 1.12 USD was not broken. However, it does not rule out the chances of breaking it this week, as ahead of us lie not only inflation readings from the euro area, but also PMI readings for industry and services for EU countries and numerous publications from the American job market, which will start on Wednesday. If we manage to break the level of 1.120 USD, the next significant stop seems to be 1.127 USD, seen last in mid-2023.
Author: Dawid Górny, currency analyst at Walutomat.pl
Source: https://ceo.com.pl/inflacja-znow-zaczyna-sie-rozpedzac-37465
