The worst day for the zloty in almost two months. The dollar exchange rate skyrocketed

The issue of inflation is starting to affect financial markets again, but this time because it does not want to fall further, especially in the United States. The disinflation process has stopped, which has led to the belief that given the strong economic growth in the US, this means that the Fed will refrain from cutting interest rates or at least postpone this move until later.

Inflation from the US hit the markets

The yield on the 10-year U.S. Treasury note rose to 4,55% on Wednesday, more than 25 basis points above session lows, to a five-month high after higher-than-expected inflation dampened expectations of imminent interest rate cuts by Federal Reserve.

CPI rose 3,5% year-on-year in March from 3,2% in the previous month and above market expectations of 3,4%, while the core index exceeded estimates for the fourth month in a row at 3,8%.

The data provided another signal that U.S. price growth has stabilized at stubbornly high levels, strengthening the case that the Federal Reserve should keep interest rates higher for longer and ultimately ease monetary policy less. As a result, fund futures showed that markets have completely removed bets on a rate cut in June, with less than 43% expecting a rate cut in July and 15% of the market expecting no cuts this year.

The dollar exchange rate skyrocketed. The zloty is stronger than the currencies in the dollar basket

With higher-than-expected inflation, higher yields and fewer chances for rate cuts in the US, the US dollar has skyrocketed. Against the Polish zloty, the dollar had the best day since February 13, growing by over 1,1%. In turn, the rate of the main currency pair EUR/USD crashed in the most spectacular way since March 15, 2023.

However, from the point of view of the USD/PLN exchange rate chart, it seems that only crossing the level of PLN 4,01 could possibly lead to another wave of USD strengthening towards PLN 4,15. On the other hand, crossing 3,87 may open the way to PLN 3,80. It is also worth noting the fact that the Polish zloty, in relation to the basket of currencies in the dollar index, is stronger than them by about 10%. In other words, if the zloty were to move like the basket of currencies in the dollar index, its rate would be closer to PLN 4,40-4,50. At the moment, however, the Polish zloty still remains a relatively strong currency, and international turbulences indicate corrections, not changes in the trend.