Despite recent successes measured by consumer inflation, there are still some warning signs in Poland. One of them is core inflation, which is currently at significantly higher levels. Across the ocean, the correction in the dollar persists despite the data.
Core Inflation Still High
Yesterday’s core inflation data only confirmed what was conveyed at the last press conference by the President of the National Bank of Poland (NBP) – interest rate cuts should not be expected anytime soon. Core inflation fell to 4.1%, instead of the expected 4.0%. The level is therefore higher by 1.7%, despite better harvests than last year. It is worth noting that better harvests are not just a local phenomenon; globally, food prices are falling. In Poland, however, the increase in VAT rates has made this change less noticeable. The problem for inflation, though, is oil prices. Currently, we are experiencing a significant price drop over the weeks. Over the year, which is how inflation is calculated, a barrel of oil is 10% more expensive than a year ago.
Correction in Cryptocurrencies
Bitcoin is back in favor. After oscillating around $62,000 for several weeks, it has bounced back to around $66,000, close to the highs from the second half of April. Analysts indicate that the leading cryptocurrency is being helped by the fact that more cryptocurrencies with a fixed exchange rate to the dollar have recently entered the market. This is a solution that allows exchanges in the US to circumvent certain legal restrictions in trading. As a result, new funds are flowing into the market. Generating additional cryptocurrencies, especially those with a fixed price, is somewhat reminiscent of printing money, but this has recently become a popular practice worldwide. It is worth noting that despite this, the process of Bitcoin dominating the cryptocurrency market continues.
Data from Across the Ocean
Yesterday, we received a data package from the USA. Unemployment claims had a better reading than last week, but it is still one of the highest results in recent months. It appears that the labor market is struggling, waiting for lower borrowing costs. Housing market data also came in weaker than expected. Both housing starts and building permits were below expectations. However, these data did not differ significantly from expectations. Theoretically, if we have weaker data, it should proportionally affect currency rates. Theoretically, yes, but it is important to remember that the data hit the market with the dollar at its weakest against the euro in many weeks. As a result, investors felt a stronger need to realize profits rather than continue selling. Hence, yesterday we saw a slight strengthening of the dollar.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl and Walutomat.pl
