PLN strong before the decision of the Monetary Policy Council

A very intense week on the financial markets is behind us. Quarterly results of companies, Fed decision, report from the American labor market. Although there were many surprises, the resultant is the strong sentiment on global markets, which favors the zloty. This week's decision of the Monetary Policy Council.

The specter of recession is receding

Very strong results of technology companies, great report on the labor market and Fed cooling expectations for quick reductions in interest rates - this is how last week can be briefly summed up. This resulted in further increases on Wall Street and moderate strengthening of the dollar. Such a package certainly means that in the US we cannot currently talk about the specter of recession, which investors were afraid of last year (although gradually less and less).

Moreover, even if the January labor market report is to some extent an aberration, strong data on economic activity (PMI and ISM indices) and super strong results of technology companies show that the economy is doing really well right now. Strong global sentiment favors the zloty. The strengthening dollar may be slightly less, but the specter of rate cuts in the US limits the scale of this movement and, as a result, positive trends dominate.

Inflation and demand rebound

The decision of the Monetary Policy Council this week is a formality. President NBP Already last year, it basically "guaranteed" no reductions at least until March. However, the question arises whether we will see any reductions this year in the context of a rebound in inflation in the second half of the year and the already recorded rebound in demand. It is this element of the predictions that the market will focus on, although I do not expect that we will learn much. Although the prospect of interest rate cuts in the US and Europe has been slightly postponed, the scenario is still likely that rates will decrease there while they remain unchanged in Poland, and this is a factor supporting the zloty.

With favorable global sentiment last week, the EUR/PLN exchange rate completed a slight correction and dropped to around 4,30, which is only slightly above last year's lows in December. We start the week with a slight weakening in response to the considerable confusion on the Chinese market, where The stock market bear market does not give up. So far, however, the poor market conditions in China have not had a global impact, so unless a crash occurs there, the impact on the zloty should be rather limited. At 9:10 a.m. the euro costs PLN 4,33, the dollar PLN 4,01, the franc PLN 4,62 and the pound PLN 5,07.

Source: Dr. Przemysław Kwiecień CFA, XTB