Wednesday’s batch of data from the domestic market did not meet analysts’ expectations. The chart of the world’s main currency pair hit the wall, affecting the exchange rate of the Polish zloty. However, gold is doing very well!
Polish data package
This morning, we got to know several vital publications from the domestic economy. The producer inflation measured annually remains at a negative level of -4.8%. It’s the 13th reading in a row below zero. Notably, forecasts indicated an even lower value (-5%), and the previous reading was adjusted upwards (from -6.1% to -5.8%). The falling producers’ prices should have a deflationary effect on consumer inflation, yet today’s readings suggest this trend may be slowly fading. Along with PPI inflation, we received an increase in industrial production from zero (after adjustment) to 4.9%. If left alone, this information would be positive. It doesn’t look as good, though, when expectations indicated a 7.3% level – a significant shortfall. The last piece of data were about employment and wages. The former fell by 0.4% y/y. In contrast, a wage increase of 10.6%, in the face of current inflation (4.2%), suggests that statistically, Poles are getting richer.
Stop at eurodollar
Last night, the chart of the main currency pair in the world reached 1.113 USD. This turned out to be a resistance that the eurodollar had not also overcome at the beginning of January. Therefore, currently, the EUR/USD exchange rate is the highest in 8 months. The next stop could be 1.125 USD (last year’s maximum). However, to get close to it, a movement to the north would have to be continued, and today it has a problem. On Wednesday, we notice a reaction, which is entirely normal after two upward sessions at the beginning of the week. The reaction of the eurodollar, which is a mild strengthening of the dollar, affects the xxxPLN charts. The zloty, being negatively correlated to the USD, weakens against major currencies today. At 14:30, the EUR/PLN rate is 4.28 PLN, USD/PLN is 3.85 PLN, for a pound, we will pay 5.02 PLN, and for a frank 4.51 PLN. The increased volatility of the EUR/USD quotations may occur at 20:00, when we will learn the so-called “FED Minutes” or the record of the last meeting of American decision-makers. That’s where investors worldwide are focusing their attention on Wednesday afternoon.
Gold records again!
The current environment is perfect for the golden commodity hitting new historical peaks. This time we reached 2530 dollars per ounce. The cause of this year’s increasing trend is not only the mounting geopolitical tensions moving capital to safe-haven assets (to which gold also belongs), but also the steady demand for the commodity from central banks, which have gathered it at an unprecedented rate since 2023, increasing their reserves. Moreover, we are on the eve of rate cuts in the US. The decrease in borrowing costs in American currency should theoretically weaken the (already weakening) dollar, to which the commodity is pegged. Also note that other central banks have already started the cycle of reducing the cost of money, so the phenomenon of decreasing fiat currencies’ cost is global. The conditions above are perfect for further increases in gold. However, lack of media information about imminent price drops can raise concerns. It indicates both bullish moods and prevailing bullish narrative. Yet, keep in mind that nothing grows infinitely, and any trend can reverse quickly.
Author: Dawid Górny, Currency Analyst at Walutomat.pl
Source: https://ceo.com.pl/czy-zloto-po-3000-usd-to-abstrakcja-61410
