Funds from the European Union support the Polish zloty

Friday brought mixed results on Wall Street. Nasdaq Composite lost 0,3 percent, Sp500 showed no major change and the industrial Dow Jones gained 0,2 percent. The rate of the main currency pair fluctuated around the level of 1,0820 and this morning the quotations increased slightly towards 1,0835.

US Treasury yields fell last Friday, mainly on the long end. This caused it flattening the yield curve. On Friday, we learned the Ifo institute's index for Germany. This week, the market is waiting for a report on Americans' spending (Thursday). The prospect of unlocking EU money supports the zloty.

The most important data releases from the US this week will be the PCE deflator for January, published on Thursday. It will attract particular attention after stronger than expected CPI and inflation reports PPI for January in the last two weeks. The market consensus assumes that the main PCE deflator will drop to 2,4%. y/y vs. 2,6 percent in December, and the base rate will be 2,8%. y/y compared to 2,9 percent in December.

KPO for Poland unlocked

Friday's reading of the Ifo index (business climate index) showed only a slight increase from 85,2 points. up to 85,5 points This shows that sentiment remains weak. Unfortunately, there are still no signs of recovery in Germany, although the situation in many other countries has improved somewhat in recent months. Of course companies in Germany suffer from many structural burdens, such as bureaucracy, long approval procedures, high energy prices and taxes, and the government is not taking decisive action. The assessment of the current business situation remained at 86,9 points. and expectations for the next six months improved slightly from 83,5 to 84,1 points.

The zloty remains strong against both the euro and the US dollar. The strength of the zloty was supported by the visit of the head of the European Commission, who announced that in the coming days European funds would be released for Poland (a total of EUR 137 billion: PLN 60 billion KPO and EUR 76 billion from cohesion policy). These measures will mean that in 2024 in Poland we will observe positive investment dynamics in the economy. Additionally, this money will reduce the need for foreign financing.

The EUR/PLN exchange rate remains near the local lows on Monday morning and is at 4,31. USD/PLN quotations fluctuate around 3,98.

Source: Łukasz Zembik, OANDA TMS Brokers