Inflation in the US is the key to zloty performance

The zloty started trading on Tuesday with a slight weakening versus the dollar, while stabilizing against the euro and the Swiss franc. The afternoon's US inflation data will decide on the levels at which the day will end. This is Tuesday's main event in the financial markets. 

The fate of the zloty depends on the US data

At 09:05 the EUR / PLN exchange rate was at the level of PLN 4,6640 and was similar to that at the end of Monday's trading, when the euro rose by 3,2 groszy. The CHF / PLN exchange rate stabilized at PLN 4,6035, after yesterday's increase by 4,3 groszy. The USD / PLN exchange rate increased by PLN 1,3 to PLN 4,2975, after the American currency went up by PLN 2,7 on Monday. 

The afternoon's US inflation data will be the event of Tuesday on the currency market, which will also have a decisive impact on the performance of the Polish currency. They will be published at 14:30 pm. It is estimated that in March consumer inflation (CPI) increased to 8,5 percent. from 7,9 percent YoY in February and was the highest in 4 decades. Core inflation is forecast to accelerate to 6,6%. from 6,4 percent R / R. 

The macroeconomic calendar for the USA (12.04.2022/XNUMX/XNUMX). Source: macroNEXT

Inflation in the US is just accelerating

A higher-than-expected jump in US inflation, which is a much more likely scenario than a surprise in the form of lower inflation, will put a stop to the proverbial price hike by the Fed in May by 50 bp, re-energizing the discussion on the US rate target. 

From the market point of view, higher than expected inflation means the strengthening of the US dollar as well as an increase in risk aversion and a deepening of the recent declines on Wall Street. These conditions are perfect for the zloty weakening.

A possible weakening of the zloty before Christmas is also indicated by the balance of forces on the daily charts of Polish pairs. In the last days of March, in the case of USD / PLN and CHF / PLN, and at the beginning of April in the case of EUR / PLN, the declines were halted, which were a reaction to the "war" depreciation of the zloty at the turn of February and March, but also discounting the end of the war in Ukraine within a few weeks. The March declines have been correcting since then. Considering the technical situation, but also the fact that the fuel for a further strengthening of the zloty is temporarily over, the extension of this upward correction in Polish pairs is the base scenario for the zloty. Even before Christmas, the euro may return above PLN 4,70, the dollar may attack the area of ​​PLN 4,35, and the Swiss franc may settle above PLN 4,60.