Until recently, we were wondering whether the dollar would reach the level of 4 PLN. Today, we are almost 4 groszy below that level. The outbreak of inflation in the Czech Republic strengthens the koruna, and Romania is not starting interest rate cuts.
Further Strengthening of the Polish Zloty
The Polish currency has been on a good run recently. Essentially, nothing has changed, so one might expect the same on the charts. Markets in the case of currencies from developing countries like predictability. In this case, the fact that the NBP president confirmed his stance during the conference greatly helps. The fact that two of the world’s major rating agencies maintained a decent rating for Poland also does not hurt. Of course, some analysts may suggest that there is room for improvement, but looking at this year’s budget deficit, it might not be worth sticking out with such ideas for now. However, it should be noted that this calm can simply be seen in the charts, as for over two weeks the Polish currency has been in an upward trend. The euro rate has dropped from 4.33 PLN to around 4.27 PLN, and the dollar rate has fallen from 4.05 PLN to 3.96 PLN. These are very good news, looking at the upcoming holiday season and potential foreign vacations. It is worse when someone from abroad wants to come to Poland.
Inflation Rebound in the Czech Republic
Our southern neighbors, like Poland in March, had 2% inflation. In Poland, inflation rebounded to 2.4%, while in the Czech Republic, a similar movement was expected, but a rate of 2.9% was received. This is an increase from 2% to 2.9% within a month. A yo-yo effect in beautiful style. This is therefore the highest result this year. It also puts into question the sensibility of the current cycle of interest rate cuts by the Czech National Bank. We still have a significantly higher interest rate than inflation, but looking at the trends, we may have problems in the coming months. It is important to remember that 2.9% on an annual basis is one thing, but the monthly increase in prices was as much as 0.7%, and this may herald a more serious problem. Currency markets reacted with a clear strengthening of the Czech koruna against major currencies. The reason was that investors expect a slowdown in the process of lowering interest rates.
Romania Does Not Change Rates
Monday was the day when the National Bank of Romania was making decisions about interest rates. Markets expected that Romania, due to recent successes in combating inflation, which is currently over 1% below interest rates, would symbolically cut interest rates by 0.25%. Interestingly, despite the surprise, there was hardly any reaction on the Romanian leu to euro pair. The Romanian currency rate is strongly tied to the euro, as the country has been aiming to join the monetary union for a long time. It is possible that this could have prevented the NBR from cutting rates. If interest rates were lowered, it would weaken the Romanian currency, which in turn could greatly complicate the local bank’s interventions to maintain a stable exchange rate.
Today, there are no important readings on the macroeconomic data calendar.
Maciej Przygórzewski – chief analyst at InternetowyKantor.pl and Walutomat.pl
