Friday brought mixed results on Wall Street. The Nasdaq Composite lost 0.3 percent, the SP500 showed no significant change, and the Dow Jones Industrial Average gained 0.2 percent. The exchange rate of the main currency pair fluctuated around 1.0820, and this morning it slightly rose towards 1.0835. The yields of US Treasury bonds dropped last Friday, primarily at the long end, which led to a flattening of the yield curve. On the same day, we got to know the Ifo Institute index for Germany. This week, the market awaits a report on American spending (Thursday). The prospect of unlocking European Union funds supports the Polish Złoty.
The most crucial US data publications this week will be the January PCE deflator, to be published on Thursday. It will draw particular attention following stronger-than-expected CPI and PPI inflation reports for January over the past two weeks. The market consensus assumes that the main PCE deflator will fall to 2.4 percent y/y from 2.6 percent in December, and the core index will be 2.8 percent y/y, compared to 2.9 percent in December.
Friday’s reading of the Ifo Index (business climate index) showed only a slight increase from 85.2 points to 85.5 points. This demonstrates that sentiments remain weak. Unfortunately, there is still no sign of a revival in Germany, even though the situation in many other countries has slightly improved in recent months. Of course, companies in Germany lament over many structural burdens, such as bureaucracy, lengthy approval procedures, high energy prices and taxes, and the government is not taking decisive action. The evaluation of the current business situation remained at the level of 86.9 points and expectations for the next six months marginally improved from 83.5 to 84.1 points.
The Polish Zloty remains strong against both the Euro and the US dollar. The strength of Zloty was supported by the visit of the President of the European Commission, who announced that in the coming days European funds would be unlocked for Poland (a total of 137 billion euros: 60 billions from the ROP and 76 billions euro from cohesion policy). These funds will result in positive investment dynamics in the Polish economy by 2024. Additionally, these funds will reduce the need for foreign financing.
The exchange rate of EUR/PLN remains close to local lows on Monday morning, indicating a level of 4.31. The exchange rate of USD/PLN fluctuates around 3.98.
Łukasz Zembik
