The European Central Bank (ECB) has made no commitments regarding future interest rate decisions, effectively entering a “wait & see” mode. Meanwhile, the Polish zloty (PLN) is experiencing a quiet week, and market attention is shifting toward turbulence in Japanese government bonds.
EUR/USD Holds Steady
As expected, the ECB kept its key interest rates unchanged. The deposit rate remains at 2%, while the refinancing rate stands at 2.15%. The central bank announced that it is now in a waiting phase, with no clear guidance on the next steps for monetary policy. Future decisions will depend on incoming macroeconomic data and changes in the broader environment, particularly in trade relations. The ECB’s goal remains to stabilize inflation at 2% in the medium term.
For now, only a sudden shift in price dynamics (whether inflation drops below 2% or rises sharply) or signs of economic slowdown related to tariffs could prompt the ECB to act. Most analysts believe that the ECB will not make any significant policy changes before the end of the year. Policymakers currently agree that interest rates are at an appropriate level. A potential risk factor is the ongoing trade negotiations with the U.S., as the EU is set to face 30% tariffs on exports to the U.S. starting August 1.
Given the lack of surprises, it’s no wonder that EUR/USD remained stable, holding above the 1.1750 level.
Muted Trading for PLN
The lack of significant movement in the world’s main currency pair has resulted in a “summer calm” in PLN trading as well. The EUR/PLN rate is slightly higher, hovering just below 4.26, but since early July, it has remained in the 4.24–4.27 range. USD/PLN shows slightly more volatility due to moves in EUR/USD, but the pair is currently near key support at 3.60.
The Warsaw Stock Exchange is also quiet, although it is worth noting that the WIG20 index is still holding above 2,900 points. The banking sector has been the main driver of recent growth, achieving new all-time highs.
Weakening Demand for Japanese Bonds
Japan has seen plenty of activity recently, though not all of it positive. The country’s political scene remains unstable, with Prime Minister Ishiba struggling to maintain his position. While a trade agreement with the U.S. was hailed as a success, many believe Japan made significant concessions. Tariffs on exports to the U.S. have been cut from 25% to 15%, excluding steel, which remains subject to a global 50% tariff. Additionally, Japan has committed to creating a $550 billion investment fund in the U.S.
A few days ago, Prime Minister Ishiba lost the majority in Japan’s House of Councillors, but he has vowed to keep fighting for favorable terms with the U.S. While reduced tariffs are seen as a win for the automotive industry, broader confidence in Japan is declining. This is evident in the rising yields of Japanese government bonds. The 10-year yield has climbed to 1.6%, its highest level since the 2008 financial crisis, while 40-year bond yields have reached a record high. Investor demand for Japanese bonds is now at its lowest in nearly 15 years.
Author: Krzysztof Pawlak, Analyst at InternetowyKantor.pl
Source: ManagerPlus.pl
