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Glapiński’s Speech Fails to Move Markets, Focus on US Inflation Data

INVESTINGGlapiński's Speech Fails to Move Markets, Focus on US Inflation Data

Yesterday, Prof. Adam Glapiński publicly addressed the Polish Monetary Policy Council’s (RPP) January interest rate decision. Thursday became another day marked by inflation news. In the morning, we were informed about the pace of price increases in the Czech Republic, but investors were more interested in the data from the USA, due to be announced in the afternoon.

National Bank of Poland’s President’s Conference

On Wednesday, we had the opportunity to hear a speech from the head of the National Bank of Poland. He was addressing Tuesday’s decision regarding the cost of money. The decision to keep interest rates at 5.75% was linked to the sustained increase in consumer inflation (CPI). During the speech, he underlined that price increases are slowing down, in line with the National Bank’s forecast. However, there was a recognition of the possibility of a return to inflationary growth in the second quarter of the year. In response to a question about future rate decisions, the president avoided a direct answer. He stated decisions would be taken based on ongoing evaluation of incoming market data. If inflation continues to decline and confirms the National Bank’s March projection, there would be room for a small reduction. However, if the CPI rebounds and reaches 8% in the second half of the year, it cannot be ruled out that there might be a move in the opposite direction, as the President highlighted.

Slowing Price Increases in Prague

Investors are currently focussed mainly on price dynamics over the Atlantic, but it’s also worth mentioning consumer inflation among our southern neighbors. According to this morning’s data, the rate of price increases fell to 6.9%, 0.4 percentage points below expectations. This happens after a December 25-basis point rate cut in the Czech Republic, which in theory should be inflationary. However, it should be remembered that the effects of changes in the cost of money are visible after several (even many) months. The CZK reacted to today’s data by weakening against the euro and the dollar. CZK/PLN rate fluctuations in both directions were seen on the chart, which quickly returned to the pre-announcement level. On Thursday morning, the CZK/PLN rate is hovering around 0.176 PLN.

Undecided Euro

This week, the currency pair’s world-class rate clearly isn’t sure which way to go. After Tuesday’s strengthening of the dollar, the EUR/USD rate fell to 1.091 USD. The EU currency’s response came swiftly, as its appreciation on Wednesday drove rates to 1.098 USD. On Thursday morning, the “greenback” is back on the offensive, driving the movement southward. Crucial for today’s EUR/USD will be the US inflation data, due at 2:30 PM. Consensus indicates a slight (0.1 percentage point) rise in consumer inflation to 3.2%, coupled with a decrease in its core counterpart. A deviation in either direction could cause larger fluctuations for the EUR/USD, which might help the Euro to decide in which direction to trend during the final days of this week.

Dawid Górny – currency dealer at Internetowy Kantor.pl.

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