The Central Statistical Office report surprised everyone - inflation in Poland below the target of 2%

The end of the quarter is upon us. The stock markets have already closed their quotation, and today the currency markets will also do the same. Due to the Easter holidays, trading itself may be slightly less liquid, but this does not mean that the last session of March will be boring. On the contrary, investors react to surprises CPI data from Poland and France, and the day will be summarized by PCE data from the USA and Powell's expected speech.

USD/PLN exchange rate unchanged by the reading

For our domestic market, the No. 1 topic is the CPI inflation reading for March. Analysts estimated that the y/y dynamics would be 2,3% compared to the last reading of 2,8%. However, the published report by the Central Statistical Office surprised everyone because it was factual the reading was only 1,9% y/y. It is true that the market expected the indicator to fall close to the inflation target, but the dynamics of this decline is clearly surprising.

The USD/PLN currency pair did not react directly to the reading, but taking into account the actions of major grocery chains in the context of VAT and rumors and relatively mild unfreezing of energy prices in Poland, the window for more decisive steps towards reducing interest rates in Poland seems to be becoming slightly more likely. Details regarding the energy price unfreezing program will be known after the holidays and they may be the last important factor that will determine the path of inflation in Poland in the longer term.

The euro is still losing

What does this mean for the Polish zloty? It seems that, taking into account data from Poland and reports on economic momentum in the euro zone, the pressure to loosen monetary policy in the Old Continent may be slightly greater than in the case of the USA. This divergence, if it deepens in the future, may constitute a basis for further USD recovery against EU currencies. Powell's speech today at 16:30 p.m. and Fr.'s report can tell us a lot about this matter PCE inflation from the USA at 13:30 p.m. Analysts estimate that inflation pressure increased slightly compared to the last readings.

The Japanese yen and the US dollar are currently performing particularly well on the broad market. It is mainly the euro that is experiencing greater declines. The Polish zloty records slight declines at the end of the week. Currently, we will pay PLN 3,9972 for a dollar, PLN 4,3025 for a euro, PLN 4,4325 for a franc, and PLN 5,0436 for a pound.

Source: Mateusz Czyżkowski, XTB