Tense geopolitical situation, not good news for the zloty

The geopolitical situation in the world remains very tense. The conflict in the Middle East continues, and even if, as Biden announced, the United States will not engage militarily, we can already hear about Hezbollah's initial involvement. However, this is not the end of negative news for the zloty. The Ministry of Finance published data on budget implementation for the first 8 months of this year. These data show the worst financial condition in many years, which may not be good news for the new government.

Biden canceled his visit to Jordan

Theoretically, we could talk about calming down the situation. US President Joe Biden denied that the United States would send troops to Israel if a new front was opened between Israel and Lebanese Hezbollah. The militia claimed responsibility for the attack by Israeli tanks, though At the moment, there is no information about any major escalation of the conflict on this line. Nevertheless, Biden canceled his visit to Jordan, where he was supposed to meet with Arab leaders.

Market tension is very high, which can be illustrated by increases in gold prices, strengthening of the dollar, but interestingly, increases in American yields. 10-year bonds are currently trading with a yield of nearly 5%, which is the highest level since 2007. Waller from the board yesterday Federal Reserve he said that the bank has one more increase planned, although this one will depend on data. Today we have a lot of statements from US bankers, including Jerome Powell.

The zloty is weakening, the state of state finances is "unknown".

The euphoria on Polish assets has faded somewhat. This is influenced not only by the global situation, but also by internal uncertainty as to who and when will form the new government. Either way, new power will receive a "cuckoo egg" right from the very beginning. The state of budget execution for the first 8 months of this year looks terrible. Revenues in this period amounted to PLN 373,76 billion, while expenses exceeded PLN 390 billion. It is expected that the growing VAT gap is responsible for this, which may amount to well over PLN 30 billion at the end of this year, which is more than four times higher than two years ago.

The state of budget execution for a given period is the worst in years, and by the end of the year it will be the worst the situation will probably worsen, therefore it is crucial from the perspective of the economy and the Polish zloty to review the state of state finances as soon as possible.

The zloty is weakening today in the morning, although the movements are not as strong as yesterday. After 9 a.m., we paid PLN 4,2276 for the dollar, PLN 4,4565 for the euro, PLN 4,7052 for the franc, and PLN 5,1287 for the pound.

Source: Michał Stajniak, XTB