The Polish currency is strengthening surprisingly. Yesterday, the US dollar dropped below 4.10 PLN, and the euro barely scraped 4.30 PLN. The dollar’s weakness is influenced by the increasing chances of interest rate cuts across the ocean. Meanwhile, New Zealand is cutting interest rates too.
Retail Sales Above Expectations
Yesterday, data about retail sales in Poland was published. It has increased by 2.3%, which is a pleasant surprise compared to the expected growth of 1.7%. Considering that a month ago we saw a year-on-year decrease of 2.2%, it may seem like good data. On the other hand, a 2.3% annual sales increase is only significant in highly developed Western countries. Bear in mind that this is the second weakest reading this year (after last month’s). However, markets are reacting to surpassing expectations, hence yesterday’s strengthening of the Polish Zloty. Once again, our currency dropped below the level of 4.31 PLN per euro. As a result, for yet another consecutive day, the euro was the cheapest it has been compared to the zloty in 1.5 months.
Chances of interest rate cuts across the ocean are rising again
After Donald Trump’s electoral victory, the market began to price in a smaller likelihood of further interest rate cuts. As we approach December, however, we’re slowly starting to believe cuts will happen. Yesterday, the chances were almost a coin toss with 52% for cuts, 48% against. Today, there is a 66% likelihood of cuts. The higher the chances of cuts, the weaker the dollar becomes. That’s why the dollar has stagnated around the level of 1.05 against the euro. The stabilization of the dollar against the euro, and the aforementioned strengthening of the Polish zloty, have led to changes in the exchange rate between the dollar and the zloty. The American currency has not only ceased to approach the level of 4.20 PLN, but instead fell below 4.10 PLN.
New Zealand is cutting interest rates
We’ve just learned of the Reserve Bank of New Zealand’s decision to cut interest rates by 0.5%. The cycle of cuts only began there in August this year, but there’s clear determination from the policy makers. Over three meetings, the main interest rate has dropped from 5.5% to 4.25%. Accelerating the rate cut process has been possible due to faster-than-expected inflation decreases. In the first quarter, New Zealanders ended with a 4% price increase; the second quarter saw a year-on-year surge of 3.3%, and the third quarter ended with an economic growth rate drop to 2.2%. These rapid declines give monetary policy makers lots of leeway. It is important to note that stronger cuts are also due to the fact that meetings take place only twice a quarter, not thrice as in Poland.
Today, in the macroeconomic data calendar, it is worth paying attention to:
– 14:30 – USA – GDP
– 14:30 – USA – US consumer spending
– 14:30 – USA – applications for unemployment benefits
– 14:30 – USA – durable goods orders
Maciej Przygórzewski – chief analyst at InternetowyKantor.pl
Source: https://managerplus.pl/dobre-dane-znow-wsparly-zlotego-79098
