The recent days have seen a perplexing downward march of the EURPLN exchange rate. Every day, the euro drops yet another penny. This is happening even though inflation is growing in the U.S., which should be drawing capital away from Europe. Meanwhile, the increase in fuel stock in the United States has led to a discount on crude oil.
Changes in Prices Across the Ocean
Wednesday’s headline news was the reading of inflation in the U.S. In terms of year-on-year rate – despite expectations to remain at 2.9% – we saw 3.0%. This is the highest threshold since June. Some might argue this small difference might be the effect of rounding up. However, attention should be drawn to the fact that a monthly price increase of 0.3% was expected, but a 0.5% increase was received instead. Rounding up did indeed take place but towards a smaller leap. Furthermore, the core inflation didn’t impress either. A decrease from 3.2% to 3.1% was presumed, but the actual rate was 3.3%. As a result, markets are preparing for smaller interest rate cuts in the U.S. than originally expected. This is quite the opposite of what the American presidential administration was hoping for. Yet one must remember that just a month ago, the chance of no interest rate cuts by the end of the year was estimated at 31%. Although it has dropped into the single digits since, it’s now heading back up to 25%.
The Zloty is Strengthening
The Polish zloty is gaining strength. One might sarcastically point out that it’s just another day. Indeed, this week has been a series of daily new lows. Yesterday was no different. This happened despite the inflation hike in the U.S., which should ostensibly have drawn away capital. But this hasn’t been the case. Investors are optimistic about the imminent end of Russian aggression. Although it won’t be a campaign term used by Trump, the mere fact of this criminal operation’s end will be beneficial, granted the terms of this ceasefire don’t demonstrate to the world that it pays to not play fair. This perspective is precisely why capital is flowing our way, and the EURPLN exchange rate momentarily reported below 4.16 zloty. The Polish National Bank’s policy of rejecting the possibility of interest rate cuts despite economic outcomes is also significant.
Continued Crude Oil Discount
Yesterday’s changes in fuel inventory confirmed what we already knew from the American Petroleum Institute’s data – there’s a temporary surplus of raw material in the market. The increase in crude oil stock over the week exceeded 4 million barrels. The effect was clear. Further discount on crude oil took place. The day began around 77 dollars per barrel. By the time the data came in, we had already dropped to 76 dollars, and then reached 74.5 dollars. As a result, there remains a gap of less than 40 cents to the lowest levels this year. We must remember that these drops were further encouraged by fear of how sanctions may influence further restriction of economic activity, thus decreasing demand for this “black gold.”
Today, it’s worth paying attention to the following in macroeconomic data calendar:
2:30 PM – U.S. – Unemployment benefit claims.
Maciej Przygórzewski – chief analyst at InternetowyKantor.pl
Source: https://managerplus.pl/silny-polski-zloty-polityka-nbp-i-nadzieje-na-pokoj-dalsza-przecena-ropy-naftowej-75851
