Optimism in the market continues, although it is unsure if it has the strength to break the important psychological level. Investors are trying to adjust their portfolios in view of the upcoming changes in interest rates.
Fight for 4.30 PLN per Euro
Since Friday, the Euro to Zloty exchange rate has been attacking the 4.30 PLN level. Today, it briefly broke this level, but it is clear that there were immediate buyers as the rate bounced back sharply. The situation is similar with the Swiss Franc rate, where the psychological threshold is 4.50 PLN. The recent strengthening of the Zloty is due to positive sentiment on the market following news about EU funds. There are no important domestic data in the following days, so we shall see how strong this movement is.
Stock exchanges at peaks
The past few days have seen further record-breaking stock index levels. On Friday, the German DAX, French CAC, and the American S&P 500 all reported historical highs. The broad WIG index also joined this group. Although Monday brought some stabilization, there is still a noticeable interest in catching this upward trend. Why are stock markets on the rise right now? The market is rife with speculation about interest rate cuts. This same mechanism, which renders investments in specific currencies and related bonds less attractive, also makes riskier investments more appealing. This is most evident in the Polish case. With the main interest rate at 5.75%, one can earn a decent return not only on the debt market, but even on deposits. This is one of the reasons why the Zloty is relatively strong compared to major currencies. Investors looking for alternatives are turning to the stock market. However, it is essential to remember that which currencies will lose in this process, and which will gain against them, will depend on the extent of interest rate cuts in individual countries. We will likely see an example of this phenomenon today at 2 PM on the Hungarian Forint.
Bitcoin breaks through 57,000 dollars
Despite recent pulling back from rate hikes in the major world economies, investors continue to explore alternative investment options. They’re finding them not only on stock exchanges, as we mentioned above, but also elsewhere. A prime example is the highly popular, but still unregulated and therefore often risky, cryptocurrency market. An influx of new capital has led the market to surge almost 10% over the last two days. However, another phenomenon is also occurring here. Investors of short-selling cryptocurrencies must close their speculative positions. Therefore, we are dealing with a situation similar to the very publicized Gamestop scenario a few years ago. It’s important to remember that the scale of cryptocurrency investments, typically denominated in dollars, is still so low that it does not yet impact the dollar’s exchange rate against major currencies.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
