The dollar exchange rate fluctuates around PLN 4. The euro exchange rate is the lowest since December. What influences PLN prices?

The Polish currency seems to be making up for losses after the most recent corrective depreciation. Currently, the US dollar exchange rate fluctuates around PLN 4, and the euro exchange rate is already at its lowest level since the end of December, around PLN 4,32. Thus, the Polish zloty may have already experienced its last correction, which led to an increase in the value of foreign currencies along with rising US bond yields. It seems that they were the main drivers of the sell-off of emerging market currencies, which may also be evidenced by the similar behavior of the Mexican peso in relation to the Polish zloty and what happened with bond yields. These, in turn, dropped from 4,20% to below 4% currently. Currently, the situation on the American debt market still seems to be crucial for the quotations of the zloty and the basket of currencies of emerging economies.

Yields down despite further Fed pause

Yesterday the committee FOMC decided to leave interest rates unchanged, a Jarome Powell he noted that March is no longer the base month for cutting interest rates in the US. From what we've heard, the Fed needs more time to assess whether inflation will sustainably reach its 2% target, and that time could be at least several months. Hence, expectations are growing that May will be the first month of cutting interest rates in the US. Nevertheless, Powell noted that an earlier cut would be possible if the labor market situation deteriorated rapidly. Here, in turn, the market will be watching, for example, Friday's data on employment changes in sectors outside agriculture.

Nevertheless, a more hawkish approach Fed and the extension of keeping rates unchanged did not lead to an increase in profitability, but actually led to their decline. So the market sees cuts coming, which could amount to as much as 150 basis points this year.

The euro exchange rate under pressure from macroeconomic data

Meanwhile, the euro exchange rate against the Polish zloty weakened, probably due to the poor economic picture of the euro zone. Here, in turn, the market expects that interest rates may be cut quite soon, i.e. in March or April, which in turn will reduce the attractiveness of EUR interest rates relative to PLN. There is no consensus on rate cuts in Poland yet, even though inflation in our country will probably approach the target NBP in just two months. Hence, it is possible that the Polish currency may still have an open path to strengthening towards 4,28 per euro.