Today’s warm-up before tomorrow’s inflation reading in the USA indicates it may get heated. Iran is rejecting the West’s appeals for resilience but remains… vigilant. The Polish zloty has had a good start to the new week.
Tame Inflation!
Trade is slowly gearing up this week. On Tuesday, the key reading was to be the American producer inflation, as a prelude to tomorrow’s main reading. Indeed, at 14:30 we had a moment of increased volatility. Both indicators (both broad and base) turned out to be lower than expected. Results at the level of 2.2% and 2.4% give hope that tomorrow the magical 3% threshold on consumer price dynamics will finally be broken. The market immediately translated today’s reading into expectations for rate cuts in September. From the morning, we saw a slow tipping of the scale towards a single reduction, currently a double one is more likely again. This hit the dollar, which is losing value against both the euro and the zloty. The rapid reduction in the cost of money is also boosting American stock market indices in pre-session trading. And this is all as a result of a reading that under normal conditions is simply ignored by investors. It is scary to think what will happen tomorrow after the CPI reading, especially if there is a surprise.
Within 24 hours…
The world is still waiting for Tehran’s reaction to the Israeli attack on Hamas leader. For several days, the media has been inundated with predictions that a full-fledged attack is to take place within 24 hours. Time flies, and Iran continues to keep everyone in check, pumping uncertainty into the markets, particularly evident in oil and gold. In the meantime, Tehran rejected the West’s appeal for a “restrained reaction”, considering it lacks “political logic”. That is, on the one hand, it remains passive, and on the other, it continues to pose a threat of attack. The United States responds to this situation by sending more warships to the region of potential conflict. Israel’s calm is surprising as it seems to be awaiting the attack and, at least officially, is not making any deescalating moves.
The Polish Zloty is still strong
The Polish zloty has entered the current week very well. Yesterday, it gained significantly, and today it continues the trend. Against the Euro, it reached 4.28 zloty per Euro, thereby achieving potential correction. Some analysts see potential for further fortification of our currency. The problem is that most of the current hanging risks, especially the geopolitical ones, will certainly not support the zloty. The dollar is also depreciating, costing only 3.92 zloty now. Similarly, this pair has also reached local support, overcoming it could prove at least difficult. It’s also worth noting the Swiss franc, which reached its annual highs in early August, and is currently already 15 groszy lower. Today’s CHFPLN rate is 4,525 zloty and further declines on this pair are not hard to imagine.
Author: Krzysztof Adamczak, Currency Analyst at Walutomat.pl
Source: https://ceo.com.pl/inflacja-w-usa-zaskakuje-zloty-rosnie-iran-trzyma-swiat-w-napieciu-43085
