Until the U.S. Supreme Court Opens the Box, Trump’s Tariffs Are Both Alive and Dead. In Poland, Markets Recall the Upcoming Presidential Election. Inflation Runs Out of Steam and Declines Inertially.
A Precise Legislative Rollercoaster
Legislative chaos continues around the tariffs imposed by the U.S. administration. On Thursday, markets were surprised by a court ruling stating that the Economic Emergency Powers Act of 1977 does not grant the president the authority to impose tariffs. Accordingly, all tariffs introduced under this act are unconstitutional, and the administration should immediately cease collecting them. However, last night brought a new twist—the appeals court stayed the enforcement of Thursday’s ruling. Importantly, contrary to Republican narratives, the court did not side with the president; it merely acknowledged the case’s complexity (due in part to numerous lawsuits) and the need for more time to issue a final verdict. The effect is that tariffs may continue to be collected for now. What is certain, though, is that the final ruling on this matter will come from the U.S. Supreme Court, and only that decision (likely) will be binding.
This legislative rollercoaster clearly impacts the dollar’s performance. Initially, the dollar strengthened on news of tariff suspension, only to give back all gains once tariffs were reactivated. The EUR/USD pair started the week above $1.14, tested $1.12 at one point, and ultimately returned near $1.133. The American currency is also weighed down by GDP figures which, despite technically beating expectations, still indicate clear economic weakness. Today, a significant report on American consumer spending is due, with investors paying special attention to the PCE inflation reading contained therein.
They Chose a Sell-Off
For a long time, the local market was resistant to the upcoming elections topic. However, it seems that today it chose to focus on this factor, showing clear nervousness. Regardless of investors’ political sympathies, domestic assets are heavily burdened by uncertainty over Sunday’s plebiscite outcome. The Polish zloty is struggling, having started today’s session very poorly. Although some losses were recovered later, the overall balance remains negative. The Warsaw Stock Exchange is also performing poorly, ranking as the weakest in Europe today (where sentiment overall remains fairly positive). Locally, attention should also be paid to today’s inflation reading, which once again surprised on the low side. It is reasonable to conclude that domestic inflation has run out of fuel, since the key disinflationary factor turned out to be… fuel prices (primarily gas). Price dynamics in Poland stood at 4.1% year-on-year. Even more interesting is the monthly perspective, where deflation of 0.2% was recorded. Next week, Poland’s central bank will hold a meeting. The market consensus expects post-election rates to be maintained, with rate cuts starting again from July. The market currently prices in total cuts of 0.75 percentage points this year, and speculation suggests this may be underestimated. This is another factor that is likely to weigh on the zloty in the coming weeks.
Author: Krzysztof Adamczak, Currency Analyst at Walutomat.pl
Source: CEO.com.pl
