The dollar is not that weak - above PLN 4 again

In recent days, the dollar first fell below PLN 4, then returned above this level. As it turns out, despite expectations that the dollar will retreat this year, the American currency remains resilient. Much depends on who cuts rates first - the US or Europe. In the longer term, the dollar will weaken, which means that Poles' holiday trips outside Europe should be cheaper.

Rollercoaster on gold

Over the last 7 days, the dollar exchange rate dropped from PLN 4,06 to PLN 3,98. Now it is back above PLN 4, although it will probably fall below this level again soon. Despite high expectations for the dollar's decline this year, it remains resilient for now. EUR / USD exchange rate is currently 1,09 and the dollar exchange rate in Poland will depend on the mutual relations between the euro and the dollar in the near future. American assets remain attractive to investors, both American stocks and bonds, whose yields have stabilized after declines in the fourth quarter of last year. In recent days, S & P500 index reached its historical maximum. This means an inflow of capital overseas and a stabilization of the dollar exchange rate.

The EUR/USD rate in the coming months will be shaped by expectations of interest rate cuts in the US and Europe. Markets expect reductions to take place in the first half of the year. Until recently, it seemed that the first reductions would take place in Europe, which is struggling with economic stagnation and, in some countries, recession. However, recent statements by representatives EBC suggest that rate cuts may be delayed even until the third quarter of this year. The market predicts that, according to the most likely scenario, the first rate cut in the US will take place in May, and by the end of the year rates will fall by 1,25 percentage points. A rate cut will worsen investment conditions in the US and, as a result, weaken the dollar. In this situation, the euro will strengthen, and with it the zloty. In such a situation, the weakening of the dollar should come before the holidays, and the stronger euro and zloty should favor reductions in prices of Poles' holiday trips outside Europe.

The USD/PLN exchange rate also depends on factors local

One of them is the very high level of political uncertainty and the impression of chaos. In a situation where most Poles have a serious problem keeping up with the changing political situation, what to say about foreign investors who have an even more difficult task. The lack of sudden movements within the zloty means that global investors - despite the impression of chaos - trust the actions of the current government and believe that it will strengthen the rule of law and support fiscal consolidation (despite the increase in budget expenditure resulting from the implementation of election promises). .

The inflow of money from the European Union is also important for the Polish zloty KPO and from cohesion funds. Recently, the European Commission announced the unblocking of cohesion funds for Poland, but the market has already discounted the improved relations with the European Union. However, the zloty may be supported by information that despite tight deadlines, Poland will manage to use most of the money from the KPO. It seems that there is no point in counting on the zloty strengthening related to the exchange of funds with the EU on the currency market, because most of this money will be exchanged in NBP.

Decisions regarding cautious rate cuts in the US should be favorable for the dollar in the coming months and well received by stock market investors. They result from the good situation on the American labor market and the decline in inflation. In the short term, the dollar will remain resistant, although in the future it will probably weaken against the euro and the zloty.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.