On Friday morning, we observe a reaction to yesterday’s inflation surprise in the US. The dollar is declining, which positively affects the Polish zloty. Mixed data from the UK did not directly affect the GBP rates. In the afternoon, the market picture may completely change, as we will learn more data from the US, this time on the dynamics of producer prices.
Inflation concerns returning?
On Friday morning, the market is trying to recover from yesterday’s turmoil caused by growth readings (compared to expectations) of inflation from the US. Let me remind you that Thursday’s data led to a temporary strengthening of the dollar. EUR/USD rates fell from 1.0935 USD to a round support of 1.09 USD after the publication. However, this state did not last too long, as a sharp rebound occurred literally after reaching the local minimum. This may suggest a speculative nature of the movement. The last hours of yesterday’s trading session were a reaction to the appreciation of the greenback, i.e. giving back the gains that brought the EUR/USD rate to the levels before the publication.
Despite everything, a trace of concern about renewed increases in the dynamics of prices across the ocean remained on the market. Especially since the oil market has been going up for two weeks now. This will certainly affect the level of inflation readings in the coming months. However, today at 2:30 PM, we will learn the latest data on producer price inflation in the US, which could once again energize the euro dollar rates in the event of discrepancies with forecasts.
“Uncle Sam” can’t make up his mind
By Friday noon, the rates of the world’s main currency pair had risen slightly to 1.0945 USD. This was certainly not a consequence of the final inflation readings from Germany, which confirmed a drop in the CPI index to 1.6% and the HICP to 1.8%. Investors simply did not react to the publications, as they were in line with preliminary readings. Eventually, the dollar was losing on the chart of the world’s main currency pair by noon, which was used by the zloty, which was gaining at that time. By noon, the EUR/PLN exchange rate fell to 4.29 PLN, and the USD/PLN rate to 3.92 PLN. Interestingly, just after 12:00 PM, the EUR/USD rates changed direction, which may indicate the market positioning itself for today’s data from the US. Despite this, the PLN remained strong. This suggests a capital flow towards Poland, which is confirmed by another growth session on the Warsaw Stock Exchange.
Data from the Isles
On Friday morning, we learned the results of industrial production from the UK and the latest GDP publications. Annual industrial production was -1.6% (forecast -0.5%). Industrial processing also fell below the line, dropping by -0.3% year-on-year (forecast -0.4% year-on-year). The data compared to the previous month were slightly better, with growth higher than forecasted (industrial production 0.5% m/m, processing 1.1% m/m). The overall tone of the GDP data remained negative, as both annual 1% (forecast 1.4%) and quarterly 0.2% (forecast 0.3%) data did not even match expectations. The mixed results had no direct impact on the pound, which today is subjected to the strength or weakness of rivals. The GBP/PLN rate fell to 5.12 PLN by noon, due to the general strengthening of the zloty. A different direction was taken on the so-called “cable”. The GBP/USD rate increased, but this is not a result of the strength of the sterling, but a depreciation of the dollar, which was visible in the morning, for example, on the previously described “uncle Sam”.
Author: Dawid Gorny, currency analyst at Walutomat.pl
This post first appeared on CEO Magazine.
Source: https://ceo.com.pl/inflacja-daje-rynkom-do-myslenia-56839
