The dollar exchange rate below PLN 4 for the first time since February 2022

The dollar exchange rate seems to be falling with minor corrections since September 2022, when the American currency cost a memorable PLN 5. This morning, the dollar is worth less than PLN 4, which means the lowest USD/PLN exchange rate since February 2022. In PLN terms, the exchange rate has already fallen by PLN 1,08 from the peak, which means that it is the biggest move of this scale since 2009 On a percentage basis, the dollar fell by 21%, the biggest drop since 2017.

US inflation is falling

One of the reasons for such a sharp sale of the USD seems to be inflation falling faster than expected in the United States. Yesterday's reading for June, mainly due to the powerful base effect from 2022, showed that prices in the US increased by 3%. Core inflation fell to 4,8%, which was below market expectations and thus potentially worse for the USD. The market is starting to take more seriously a scenario where the Fed will decide to raise it again in Julyand then refrain from further interest rate hikes.

Although inflation in the US is likely to rebound in the coming months, also due to the base effect, the Fed may wait for the effects of the previous rate hikes before taking the next step. This may have a global negative impact on the US currency, especially since European Central Bank whether the Bank of England be still in the cycle of hikes.

Disinflationary revival

Meanwhile, in Poland, although there is talk of interest rate cuts this autumn, foreign investors seem to be investing their capital further on the Vistula River. The Polish economy seems to be at the best possible investment point. This means a potential phase of disinflationary recovery. Hole CBA is probably behind us and inflation is expected to slow down. This creates a convenient space for the Polish stock exchange and the influx of capital from abroad, which may continue to strengthen PLN.

It seems that this trend may be reversed in the near future only by the disappointing Fed on July 26, which, instead of pausing hikes, would talk about further tightening of monetary policy. However, this is now a less likely scenario.