Currency summary of the week. Strong inflationary pressure is yet to come?

Last week was marked by considerable ignorance. Stock exchanges, although in extremely mixed moods did not show much activity on currency pairs. To a large extent, they behaved quite predictably, where the dollar was still appreciating against most currencies. All geopolitical disputes ceased, and central bank meetings, which are ahead of us in the coming days, came to the fore.

Poland ever further from stability?

Poland largely avoided the economic slowdown. Considering the recent years, the low interest rate environment has been very economically advantageous. It broke into low and satisfactory inflation and good economic growth. The situation changed towards the end of the year, when the price increase rose to the alarming level of 3,4%. Nevertheless, the holiday period slightly overshadowed the vigilance of the Monetary Policy Council. At the moment, there are no signs that interest rates will change. Unfortunately, the truth is that growth prospects will deteriorate and one should rather expect a greater slowdown in the domestic economy. Trends in the global economy will sooner or later also become apparent in the country. Therefore, the question arises whether the very cautious MPC policy will await the crisis moment, whether the council wants to blow it cold?

EUR / PLN chart, M30 interval. Source: xNUMX XTB xStation

Currently, the zloty has lost a bit and we can observe its depreciation against the euro. Considering only the aspects of the technical analysis, EUR / PLN is in a good upward trend. The quotations at the moment reflect from the strong, psychological resistance located at the level of the peaks of the first days of January, around the price of 4,2477. We can currently expect a test of recent demand movements to levels 4,2386-4,2410. The "small goal" that EUR / PLN may aim at is the moment when we will have to pay 4,2524 PLN for the euro.

Markets washed out of emotions

The trade agreement signed on January 15 went almost indifferently on the market. The trade conflict that followed the stock exchanges practically since 2018 often made itself felt. This correct and more speculative news was valuing the most prone assets on an ongoing basis. Therefore, the signing of the settlement was only a formality between the conflicting countries, which the market had proverbially somewhere. What's more, events in the Middle East appeased. Therefore, the dollar has no reason to appreciate on the wave of uncertainty. Ahead of us are the next phases of talks that are to lead to the signing of the second stage of the agreement. The American side gives clear signals that the Chinese have nothing to count on in relation to the reduction of tariffs before November (elections). However, the eastern side of the conflict announces that it is not going to wait until the end of the year. They want to start negotiations as soon as possible because of the opportunity to reduce the tariffs on their products (as announced).

Chart USD / JPY, H1 interval. Source: xNUMX XTB xStation

Eastern currencies have been quite losing recently against the dollar. Looking closely at the USD / JPY pair, it's hard to see that the Japanese will feel like taking over the appreciation stick in the coming days. USD is very strong when it comes to yen or yuan. It is also worth adding that the Central Bank of Japan meeting is ahead of us this week. Bankers' statements with positive overtones can bring a bit of freshness to the market and reverse the current situation. Technically, USD is currently in a very good position. All supply movements are collected from EMA 20 or 40, which gives a clear picture that short- and medium-term investors are assuming further strengthening of USD / JPY.

Strong consumer vs uncertain industry

Recent readings from the US on retail issues surprised very positively. A strong consumer is definitely a big advantage, which fueled base sales. Undoubtedly, good data are also the result of the holiday season, at which the demand for goods and services increases. Readings from the labor market were also positive. Readings on unemployment benefits were lower than expected consensus.

On the other side of the coin, we have a weak economic situation in the Eurozone. We still have a PMI publication for most European countries. However, on the wave of December holiday optimism, we should not expect an outstanding recovery for longer.

Chart EUR / USD, H4 interval. Source: xNUMX XTB xStation

The euro depreciated last week against the dollar. A meeting remains ahead of us EBCwhich can change his fate a bit. The chart in terms of technical analysis still speaks in favor of the dollar. Sentiment remains bearish and will probably be like this for the next week until we get to know the data from the German economy and hear what interesting the bankers of the European Central Bank have to tell us in the new decade.