Wednesday morning brings a continuation of the zloty appreciation seen in the recent days. The Polish currency is gaining on the wave of improved moods in global markets and the accompanying dollar weakening. The key to further changes in the domestic FX market will be the inflation data in the euro zone, released today.
At 09:37 a euro had to be paid 4.5515 zlotys, which is 2 groszy less than on Tuesday. The dollar was falling by 2.50 PLN and costing PLN 4.0310, losing a total of over PLN 9 from the Friday’s peak. The zloty also appreciated against the Swiss franc and British pound. The CHF / PLN exchange rate fell by PLN 0.10 to PLN 4.3851, and the GBP / PLN exchange rate by PLN 0.10 to PLN 5.4595.
However, further appreciation of the zloty may be very limited due to the consumer inflation data from the euro zone, released today at 11:00 CET, which will gain significant importance ahead of the Thursday’s meeting of the European Central Bank (ECB).
Inflation reports from Germany, France, Spain and Portugal, published so far, suggest that the fall in inflation in the euro zone to 4.4% forecast in January is with 5 percent December’s y / y, it is heavily shot through. Inflation is likely to be higher, which may alarm the European Central Bank and influence its future interest rate decisions. The futures market saw this risk earlier, pricing in the first interest rate hike in the Euroland this year, while not so long ago the market consensus pointed to the beginning of 2023.
Why may inflation in the euro zone, higher than expected, have an impact on the zloty? First of all, because it may exacerbate the inflation rhetoric by the ECB at tomorrow’s meeting of the bank, which would again spoil the moods in the financial markets, increasing risk aversion and damaging the zloty.
On Thursday, monetary policy will be determined not only by the ECB, but also by the Bank of England. The market expects an interest rate hike by 25 basis points to 0.50%. and announcements of further increases. Materialization of these forecasts should strengthen the pound. Including in relation to the zloty, pushing the GBP / PLN rate again above PLN 5.50.
Author: Marcin Kiepas – Tickmill analyst
Source: ISBnews
