Dollar Strength Persists Amid Rising US Inflation and Producer Prices; Poland Maintains 5% Inflation

The strength of the dollar following Donald Trump’s victory shows no signs of slowing down. However, this surge shouldn’t be attributed solely to changes in power. Currently, it’s significantly stronger data and potentially faster rising prices that are pushing the greenback up. Meanwhile, Poland is experiencing 5% inflation.

Inflation still at five percent

The final reading of inflation in Poland confirmed preliminary data. A level of 5% (increase by 0.3% on a monthly basis) was not a big surprise. However, it’s worth noting that according to the November forecast of the National Bank of Poland (NBP), the situation will worsen. There is a more than 50% chance that by the end of March, inflation in Poland will exceed 6%. From that point, a decrease is expected. In the context of this forecast, presuming interest rate cuts as early as March seems brave. If this scenario plays out, inflation will nominally exceed interest rates.

Job market across the ocean

Yesterday we saw better data from the US job market, with unemployment benefit claims at 217,000. Therefore, we are again in ranges where a decrease in unemployment rate is possible. This is a surprising situation, especially considering the expectations of an upcoming economic slowdown in the major western economies. Adding the recent record-highs of the US stock market paints a very favourable picture for the further strengthening of the dollar. However, everything depends on whether we will see weaker data again.

Prices are also rising for producers

After data about rising consumer prices, it was time for the reading of producer prices in the US. The index rose in October from 1.9% to 2.4%, even exceeding high market expectations at a 2.3% level. The past few days have strongly supported dollar strength. Faster rising prices mean lower chances for interest rate cuts. This is, of course, not the only reason why yesterday one euro only cost a dollar and five cents. This is the strongest position of the American currency against the euro in over a year.

Maciej Przygórzewski – chief analyst at InternetowyKantor.pl