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What next for the euro and the dollar? What will the week bring?
Readings of macroeconomic data from the US last week confirmed the growing optimism related to the expected end of interest rate hikes. Moreover, investors' attention is focused on EURUSD. What is the reason for the recent bull market on this currency pair?
Imminent period of easing
Bank failures seem to have only temporarily dampened optimism in the economy. Recent macroeconomic data from the US, including the inflation reading, give hope that soon we will witness the end of the cycle of interest rate increases. This, on the other hand, would mean an imminent period of easing. Nevertheless, these positive tendencies slowed down the Atlanta Fed data, which showed a high dynamics of wage growth. Therefore, we still have to expect another interest rate hike at the Fed meeting in May.
If we're talking about interest rates, it's this market seems to be the main determinant of growth on the EURUSD currency pair. The market is reducing interest rate expectations in the US, but not in the euro zone. This direction, however, is very favorable for EURUSD. According to Dr. According to Przemysław Kwiecień, the market looks at it in the short term, because it values the movements of central banks, not what is actually happening in the economy. For many years, the eurozone operated with negative interest rates - that's why 3,5% in Europe is more dangerous than in the US, even 5%. In addition, in the euro area there is a visible decline in real income, which is deeper than in the US. This calls into question the foundations of further EURUSD rally.
Recently, the Polish zloty has slightly strengthened. However, you have to remember that it is still relatively cheap. Unfortunately, the inflation situation in Poland looks unfavorable compared to other economies. Therefore, it is inflationary pressure that may cause a weakening of the PLN valuation.
We invite you to Monday's meeting with the Chief Economist XTB dr Przemysław Kwiecień.
In today's video:
- Is this the end of the cycle of interest rate hikes by the Fed?
- will the EURUSD bull market continue?
- does the Polish zloty have the potential to strengthen further?
In addition, due to the very dynamic situation in the world, additional ones will be made available raports Video on the impact of war, pandemic and economic crisis on the global economy.
About the host
Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.
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