Wednesday’s trading did not go well for the domestic currency. The global risk-off environment also affects the capital markets. Not only the Warsaw market is dropping, but also the hyperactive German DAX. Gold holds steady and glares towards 3000 USD. Inflation is making its presence known in subsequent countries, but not in New Zealand.
Risk-off
On Wednesday, there is a risk-aversion scenario playing out. The dollar and the Swiss franc are strengthening on forex, and the zloty, which gives back profits gained during several previous sessions, is dropping. Losses are also visible on stock markets. Poland’s WIG20 is sliding from around 2700 points to 2640 points. The jolt is also seen on German DAX, which after slightly touching a new ATH (All Time High) of 23000 points, slipped below 22700 points. Gold, considered a safe haven, is doing well in this environment. By midday, the precious metal had hit another historic high of 2947 USD per ounce. The sentiment today is thanks to, among other things, the ongoing discussions about ending the war in our Eastern border. Their bilateral nature (excluding Ukraine and other European countries) is supposedly clear, but still shrouded in some mystery. Everyone is asking: “What’s next?”, which contributes to market jitters. Trump is adding fuel to the fire, talking about additional tariffs on cars, chips, and medicines. This has an impact on the EUR/USD exchange rate, which is dropping to 1,042 USD around midday. The dollar is strengthening at the expense of the zloty. At 14:00 the EUR/PLN rate had moved to 4,18 PLN, we went back to 4,00 PLN for USD/PLN.
Inflation is Knocking at the Door Again
In the ambiance of geopolitical uncertainty, the dynamics of price rises reassert themselves. Last week there was a spurt in Poland, and yesterday’s inflation increase in France proved to be a prelude to upward readings in other countries. According to the latest publications, the pace of price growth is also accelerating in Canada and the United Kingdom. In the Maple Leaf country consumer inflation rose from 1.8% year on year to 1.9%. Its core counterpart (without food and energy) is at 2.1% year on year (previously 1.8%). On the Islands, the main indicator is at 3% year on year (previously 2.5%), whereas core CPI has jumped from 3.2% year on year to 3.7%. Moreover, in the United States since the 90s, there has been the longest period (46 months) when the core inflation (PCE core) has remained above 2% – a target set by the FED. Despite the increasing inflation dynamics readings in Canada and the United Kingdom, today both the Canadian “loonie” and the British pound are losing to the US dollar, which is associated with the capital flow towards the USD considered a safe haven.
Antipodes are Cutting Rates
Yesterday we wrote about the first rate cuts in Australia in 4 years. Although the RBA decided to move down, it approaches further cuts with caution. Today their close neighbors are making more cuts. The Reserve Bank of New Zealand has reduced the cost of money by a whopping 50 basis points. This was the third consecutive cut of this size. After the cut, the main interest rate stands at 3.75%. Despite the decrease in the cost of money, the real interest rate (interest rate minus inflation) remains positive, as the last two quarterly price dynamics readings were 2.2%. Shortly after the published data, the “kiwi” weakened against the dollar, the euro or the zloty, however, later part of the session made up for morning losses and more.
Author: Dawid Górny, currency analyst at Walutomat.pl
Source: https://managerplus.pl/risk-off-na-rynkach-zloty-oslabia-sie-kurs-dolara-wraca-do-4-zl-40040
