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The dollar is the cheapest since the first half of January

The dollar is the cheapest since the first half of January

created Marcin Kiepas25 May 2021

Tuesday morning in the currency market was marked by the weakening of the dollar and the strengthening of the zloty. In the case of the zloty, this is another day of its appreciation. Today he is helped by good moods in global markets and the related increase in risk appetite, as well as optimistic macroeconomic data released in the morning from German (in May index of the Ifo institute increased to 99,2 points), as well as the highest EUR / USD exchange rate since January 8. 

USD / PLN the lowest for almost 5 months

At 13:30 pm the USD / PLN exchange rate fell by PLN 1,1 to PLN 3,6585. The last time the dollar was so cheap was on January 7th. Since the peak at the end of March, the American currency has dropped by as much as PLN 32 in total.

USDPLN Daily_25052021

USD / PLN daily chart. Source: Tickmill

Today, the zloty remains quite stable in relation to the Swiss franc and the euro, which after yesterday's declines were the cheapest in about 3 months. You have to pay PLN 4,0905 for the franc and PLN 4,4815 for the euro. On the other hand, the pound cheaper by almost PLN 1, continuing the move from Monday and falling to PLN 5,1860. This is the lowest level since the end of February. And probably the sell-off of the British currency is not over yet, as the daily GBP / PLN chart has just broken the local lows from April, which opens the way to PLN 5,10. 

The zloty is helped not only by good market sentiment and increases EUR / USDbut also waiting for today's results of the meeting Bank of Hungary. Admittedly the bank will not change interest rates, but after the recent hawkish comments from its representatives, as well as due to the acceleration of inflation in Hungary in April to 5,1%. from 3,7 percent Y / Y in March, the market expects definitely hawkish tone of the statement. And this will be another signal that the pressure on the Monetary Policy Council is growing, which should definitely move away from dovish rhetoric by July at the latest.

The mood in the world, rising EUR / USD exchange rate or waiting for the afternoon results of the Hungarian Bank's meeting are all short-term factors. The strengthening of the zloty, which has been ongoing since the end of March, is primarily driven by a strong acceleration in inflation in Poland and the accompanying economic recovery, which in the long run will result in the Monetary Policy Council's departure from ultra-loose policy towards interest rate increases.

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About the Author
Marcin Kiepas
Tickmill UK analyst. Financial markets analyst with 20-year experience, publishing in Polish financial media. He specializes in the foreign exchange market, Polish stock market and macroeconomic data. In his analyzes he combines technical and fundamental analysis. Looking for medium-term trends, examining the impact of macroeconomic data, central banks and geopolitical events on the financial markets.

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