Days pass, and the Polish zloty seems insatiable as it continues to push the boundaries of its strength. Although theoretically, today’s inflation data from the Wisła might have aided it, investors are instead looking elsewhere, primarily at Munich. The yearly security conference that commences there has gained importance due to the rising pressure on the US to end (suspend?) the war between Russia and Ukraine as soon as possible. The aggressor has the chance to reaffirm the shift in boundaries in Europe.
Inflation And Interest Rates
Although the Central Statistical Office did not gift consumers or borrowers with anything for Valentine’s day, they did indeed bestow a small gift upon the Polish zloty. January’s annual inflation data over the Wisła is 5.3%, a value that initially paints a negative picture. The situation appears even worse when we realise that this figure exceeds previous predictions (4.7%), surpasses expectations (5%) and is the worst since March of the previous year. The acceleration in price dynamics is primarily attributed to the most burdensome, painful and necessary expenses for citizens. Energy carriers were more expensive by 13.2% year on year, costs related to housing by 8.8%, and food and non-alcoholic drinks by 5.5%. Higher inflation is, of course, good news for the zloty since it supports NBP’s president scenario for placing the likelihood of interest rate cuts farther into the future. However, it’s worth noting that a stronger PLN should cool down the price dynamics due to lower import costs, including energy resources.
Where Are The Boundaries?
Without neglecting the importance of inflation data, which is crucial for the prospects of the zloty for various reasons, investors today, as in the past few days, are focusing on something entirely different. The attention is naturally concentrated on the events surrounding the US-driven quick end (although rather suspension / freezing) of the war across our eastern border. Statements and signals coming from the American administration may be unsettling for Ukrainians and Europeans. It seems like the Americans are planning to negotiate with Putin at any costs, completely neglecting the long-term effects of significant concessions to the aggressor. Furthermore, it gives an impression that Donald Trump plans to operate over the heads of the EU, which doesn’t bode well for future negotiations between the Union and the US. However, markets are viewing this situation similarly to the American president, focusing on short-term gains rather than long-term risks. This is why not only the zloty strengthened in recent weeks but also the Warsaw Stock Exchange, whose profits since the beginning of the year are beaten only by the Moscow one. The Russians decided today to remind us of their negotiation style and shelled the dome surrounding the destroyed nuclear reactor in Chernobyl.
Mirage Of Tariffs Against The USD
In addition to the Russo-Ukrainian war, investor attention is focused on the ongoing trade war or maybe rather its specter. This week, high (25%) tariffs were announced on steel and aluminium, but investors feared further escalation, which has been pushed back for now. Yesterday, Donald Trump first announced that he would introduce so-called reciprocal duties, which turned out to be a mere memorandum. By April 1, the administration is to determine the rates to be imposed on individual countries, but the time to implement them is 180 days, which gives a relatively long period of possible negotiations. However, according to the US president, the VAT tax (not used in the States) is also a form of duty and has to be considered in the calculations. Nonetheless, the news coming from this front is currently impacting like a motivation for risk mitigation and simultaneously weakening the dollar. Thus, the EUR/USD rate overcomes additional obstacles and currently remains above 1.046 $. This results in a decrease of USD/PLN, which, after breaking the support at 3.99 zł, stays stably below this level. The euro’s progress stopped deepening local pits, but it doesn’t move away from 4.16 zł.
Author: Adam Fuchs, Currency Analyst for Walutomat.pl
Source: https://managerplus.pl/kurs-dolara-ponizej-396-zl-euro-blisko-416-zl-gdzie-jest-granica-43418
