The Polish zloty is on the rise again, GDP in Poland is in an upward trend

In recent months, the Polish zloty has been carried by positive sentiment on global stock exchanges, and although since yesterday we have been observing a slight correction both on Wall Street and in Europe, the foundations for the zloty remain very strong and Polish assets have gained.

Yesterday's data for January regarding wages in January were significantly above forecasts in Poland, and although industrial production failed to meet market expectations, and PPI inflation collapsed, signaling pressure on Polish producers; very strong wage data may signal that there will be no rate cuts this year or that there will be no cuts at all. On a monthly basis, wages fell by 3,3% against an estimated decline of 4,9%. However, on an annual basis wages in January increased by 12,8% against 11,2% expected and 9,6% previously.

The disinflationary trend continues

Declining gas prices on global markets and lower CO2 emission permit rates may indicate lower energy tariffs. This means more money in the wallets of Polish consumers and is an additional argument for treating 'nominally lower' inflation as temporary. Of course the readings seem favorable from the economic point of view; the disinflationary trend continues and seems obvious, although the future remains uncertain.

The main threats, apart from higher VAT and unfreezing of energy prices, for inflation are very strong consumers who, although they spend more cautiously (data for December), cannot be expected to tighten their belts given such high wage dynamics.

Employment on a m/m basis increased in Poland by 0,3% compared to 0,4% previously and 0% reading in December; year-on-year decreased by 0,2% - as expected. On the other hand, producer prices fell by a record 9% y/y compared to an expected decline of 8,3% and 6,4% retreat in December. January's industrial production increased by 1,6% annually, below 3,1% expected; on a monthly basis, sales in industry increased by 2,3% compared to 3,8% forecasts and an almost 10% decline previously. The overall picture of these data leads to the conclusion that GDP in Poland will maintain an upward trend, with strong consumption readings, so it should not be surprising that the Polish zloty will strengthen, USD/PLN fell below 4,00 again today.

The uncertain condition of the global economy

The situation comes at a time when the condition of the global economy remains uncertain. Citigroup's chief financial officer, Mason, indicated that he expects the growth of consumer spending in the US to slow down. In turn, the Fitch Ratings agency signaled that new GDP calculation models indicate a risk of growth for the US and decline in German GDP in the first quarter of 2024.

The vast majority of economists expect the Fed to cut rates by 75 bp or 100 bp this year, which in the case of the Monetary Policy Council currently seems unlikely. at least a 'dovish' forecast. Therefore, there are arguments for deeper declines in USD/PLN and EUR / USD they are still on the table.

Today, investors in Poland are waiting for the set of macro data published at 10:00, where we will know the readings of construction and assembly production and the BIEC index. Apart from the minutes from the last Federal Reserve meeting, the macro calendar is very light today.

Today we pay PLN 3.995 for the American dollar, PLN 4,31 for the euro, PLN 4,525 for the Swiss franc and PLN 5,037 for the pound sterling.

Source: Eryk Szmyd, XTB