The Zloty quickly weakened against the dollar, with the dollar now costing over 4 Zloty. On the other hand, the price of the euro remains relatively stable. March could bring about significant changes in the foreign exchange market.
The lowest point in the past 52 weeks was 3.90 Zloty, while the highest was 4.49 Zloty. This means that by the beginning of the second half of January 2024, the dollar strengthened by 2.8% year-on-year.
“The weakening of the Zloty is connected with the return of the dollar to the market,” says Michał Stajniak, an expert at XTB, in an interview with MarketNews24. “We have a decidedly better economic situation in the US than we have in Europe. The greater risk of economic slowdown lies with Europe.”
Financial markets in the second half of January reacted to recent falls in the EURUSD pair, which were coupled with increases in the yields of US debt securities and sell-offs in the stock market. Despite improved sentiment, a change in predictions regarding the first interest rate cuts left its mark on markets and could independently herald wider changes in stock market sentiment.
Higher data on US retail sales and recent comments from FED and ECB bankers suggested that interest rate cuts might come a bit later than the money market currently prices in. The macroeconomic backdrop in the estimation of investors has changed, with money markets now pricing in a “mere” 60% probability that the FED will decide on the first interest rate cut during the Federal Reserve’s March meeting. A week earlier this figure was around 70%. These revisions led to an increase in the yield on the 10-year US treasury, which broke through the 4.1% barrier (the highest since the first half of December 2023) and is currently trading close to this area.
“Predictions of a later-than-expected interest rate cut work in favour of the US dollar,” comments the XTB expert. “We also have internal reasons for the dollar’s weakness, related to uncertainty about the funds from the KPO. Prospects are such that by March the dollar exchange rate could rise in the region of 4.10 – 4.15 Zloty.”
March is significant due to the decisions on interest rate cuts by the Fed, but also the Polish Central Bank (RPP). It is after these decisions that the Zloty may regain some of its strength.
A strong dollar pushed the EURSUD pair towards the 1.09 level, which now constitutes a key control zone in the FX market. A potential breakout from these levels could theoretically pave the way to local lows from December 2023 in the 1.0750 zone.
The euro exchange rate against the Zloty changed to a much lesser extent than on the USD/PLN pair. A price in the vicinity of 4.40 Zloty means that we are 10 groszy above the 52-week lows. Euro should remain somewhat weak, its price should not exceed 4.45 Zloty, and the situation should remain quite stable.
