The zloty is rebounding from the last sell-off. USD / PLN below 4,44

On Tuesday morning, the zloty catches its breath, counteracting the last discount. He is helped by the rebound on EUR / USD. The afternoon's data on producer inflation in the US will decide at what levels the Polish currency will end the day.

PLN is recovering from losses

In the morning the zloty is slightly stronger against the euro and the dollar, after yesterday a strong sell-off wave swept through the domestic currency market, which was a consequence of a strong deterioration in moods in the global markets, a strong rise in risk aversion, a strengthening of the dollar, but also weak data on the balance sheet Poland's payment system. 

The morning appreciation of the zloty is a reaction to a slight improvement in moods in the global markets, after the recent "storm" in the markets and the general escape from risky assets. Growth recovery also helps EUR / USDafter three days of a strong discount on this pair. 

In the morning for the dollar you had to pay PLN 4,4367 against PLN 4,4629 at the end of the day yesterday and PLN 4,25 tested last week. The euro cost PLN 4,6409.

USD / PLN daily chart. Source: Tickmill

EUR / PLN daily chart. Source: Tickmill

The market is waiting for inflation data 

The fate of the day in the currency market will be decided at 14:30, when May's US producer inflation data will be released (forecast: 10,9% y / y). They will be another important benchmark for expectations ahead of tomorrow Fed meetingthus they will have a big influence on the sentiment in the financial markets.

Unfortunately, the outlook for the Polish currency remains unfavorable. The rise in risk aversion in the global markets and the strengthening of the dollar, which are driven by the expectations of larger interest rate hikes in the US, make one take into account a further weakening of the zloty. Especially that Adam Glapiński himself has recently added fuel to the fire, suggesting that the Monetary Policy Council is close to the end of the interest rate hike cycle. And this stands in stark contrast to the currently expected higher interest rate hikes in the US, which is an important benchmark for monetary policy in Poland. The market has just shifted its expectations and assumes that at tomorrow's meeting the Fed will raise interest rates by 75 basis points, and not by 50 points as previously assumed. This will mean that the disparity in the level of the cost of money in Poland and the US will decrease, which is unfavorable from the point of view of the zloty.

Also unfavorable for the zloty are the data released yesterday on the growing and higher than expected Polish current account deficit. Especially as it can be expected that more such worse data will flow from the economy in the coming months. 

Also unfavorable for the zloty are the proposed easing of the expenditure rule by the government, which will increase fiscal spending and additionally increase the inflationary pressure, reducing the effectiveness of interest rate increases in Poland.