The industrial condition index published at 9:00 am confirms the dynamic rebound of the Polish economy. The industrial PMI rose by 2.4 points stronger than expected. Mainly high inflation remains the global problem. This issue directly affects the worse atmosphere in the zloty.
Concerns about too high price increases can be seen in virtually every country. In the UK, the chief economist of the Bank of England said inflation could hit 4% by year-end, double the bank’s inflation target. All over the world, central banks may therefore have greater appetites to cool down economic growth. This will not appeal to equity investors and can negatively affect the overall level of risk acceptance. This would be clearly bad news for the PLN. At this point, it is worth recalling that the NBP is sending clear signals to the market that the current strong price increases are temporary and it is not necessary to raise interest rates. More and more analysts doubt whether the current level of interest rates in Poland is sustainable even in the medium term.
Therefore, any news of less price pressure is optimistic and reassuring. Today, earlier in the morning, we learned the data on consumer inflation from Switzerland for June. Inflationary pressure has eased. Analysts expected the CPI to rise by 0.2%, and the actual reading is 0.1%.
USD / PLN is in the range of 3.77 – 3.845, but yesterday’s demand was clear. Today, just reaching the upper limit of the aforementioned range may herald a stronger upward move. EUR / PLN was falling since mid-June to break this trend yesterday. In this case, the important level is only around 4.565. The pound’s important resistance level is also relatively high, but in this case trading since April this year looks dangerous. GBP / PLN is slowly building a formation that could herald further gains.
It is worth reminding about the consolidation of quotations, in which the zloty, and more specifically the zloty index, has been present since the second half of 2019. It is quite a large triangle-shaped zone. From the pandemic trough, each time the PLN grew in strength, it was stopped at the upper boundary of this triangle. The course is currently in the middle of this range. This may be a legitimate concern for zloty holders, as the atmosphere on world markets is excellent. A very high risk appetite persists. Under such conditions, significant increases in the PLN could be expected, especially when the rebound in the Polish economy is stronger than analysts expected. It is clearly visible that concerns about high inflation, and more precisely a very unfavorable distance between the level of inflation and interest rates in the country, discourages foreign investors from engaging more seriously in the zloty. Hawkish movements or declarations by central banks from the Czech Republic and Hungary are also not helping.
Today in the calendar, after the publication of PMI indices from other European countries, there are still many readings of key economic data. The most important is the unemployment level in the euro zone at 11:00 CET, where the 8% rate is expected to be maintained. Then at 2:30 pm weekly applications for unemployment benefits from the USA and the PMI (ISM) on the condition of the industry in the USA.
Source: CMC and ISBnews
