Markets Stabilize, But WIG and Zloty Weaken

Towards Stabilization

After several days of heightened volatility, markets are starting to stabilize. The Nikkei, Japan’s stock index, the main character of the past few days due to its more than 12% decline on Monday, returned close to Friday’s closing prices and Monday’s opening levels after two days. European stock markets are also within this range, although there were massive drops on opening in Europe, hence this gap is larger. However, there are weaker markets that aren’t coping as well. An example is the Polish WIG, especially the index of the largest companies, or WIG20. Recent events have also resulted, albeit to a lesser extent, in the weakening of the local currency. Since the start of this turmoil, the euro-zloty exchange rate has jumped up by about 2.5 groszy and we are just below the level of 4.32 zł.

Trade in the USA

The fact that the Americans have a trade deficit surprises nobody. However, it is worth noting that a faster increase in exports than imports gives at least a glimmer of hope of balancing this phenomenon. For the markets, the increase in exports seems more important than the deficit itself. This shows the strength of the local economy. This can be seen in the EURUSD quotations, which stopped attacking the one dollar and ten cents for euro level yesterday and is stabilizing a cent lower. The dollar’s stabilization is also influenced by improving moods and a return to predicting four, not five, interest rate cuts this year.

Australia did not change interest rates

We learned the decisions of the Royal Bank of Australia yesterday. It left the main interest rate at the unchanged level of 4.35%. The market speculated whether the increase in inflation in the second quarter might encourage a rise in interest rates. On the other hand, in the longer term, the market still expects cuts by the end of the year. It is rare for a central bank to raise interest rates only to lower them a few months later. After the decision, the Australian dollar’s exchange rate mildly lost value – investors, counting on the mentioned interest rate hike, were reversing their investment positions by selling the Australian dollar.

Today in the macroeconomic data calendar it is worth paying attention to:

2:00 PM – Romania – decision on interest rates.

Maciej Przygórzewski – Chief analyst at InternetowyKantor.pl