The situation on the Polish zloty (PLN) is quite calm before the end of this week, when may change ratings from two agencies. While PLN is quite relatively strong compared to the situation in recent weeks, certainly this can not be said about other currencies of emerging economies.
Situation on the currency markets is relatively calm. The US dollar is trying to regain its vigor which has lost on consecutive days of the new year, despite the good data from the US labor market. Positively surprised wage growth, which generates further pressure on inflation, which will probably result in faster interest rate hikes. In addition dollar is waiting for the moment of taking the office of president by Donald Trump, which will take place on 20 January. Already during today’s session we can expect quite strong movements in the currency market, which will be connected with press conference of new president of the United States. It is expected that Trump will present candidates to his office, he will speak more about his proposals for fiscal support to the economy and will talk about tax reforms, which may introduce a small revolution for world trade and at the same time be another positive signal for the US dollar.
A lot is happening on the emerging market currencies, particularly the Mexican peso and Turkish lyre. Mexican peso lost due to concerns about the introduction of a new trade policy by the United States and withdrawal of US investors from this country. Despite the national bank intervention Mexican peso is now cheapest in relation to dollar in history. Moreover, OECD Secretary General said that he does not expect imminent strengthening of the currency, what have additionally led to its weakness.
On the other hand, in case of Turkish lira we have to deal with impasse of the central bank. This is pressured by the government to not increase interest rates which could harm investment and reduce economic growth. The problem is, however, relatively high inflation, which should be suppressed by the central bank. As in case of Mexico, there was a foreign exchange intervention, but it was only a momentary breath for the Turkish currency.
Polish Zloty (PLN) totally opposite to other emerging currencies is relatively strong. The market consensus insists no change in the rating from Fitch and Moody’s, although it is worth noting that Moody’s currently has the highest rating of all the agencies and a negative outlook. Some concerns about future gives agency Standard & Poor’s, which has decided to lower economic growth forecasts for the Polish to 2.8% from 3.0% the previous year and to 3.2% from 3.3% for the current year. After 10:00, the euro pay 4.3707 PLN, the dollar: 4.1426 PLN, the franc: 4.0763 PLN and a pound: 5.0369 PLN.
Michael Stajniak Analyst of Financial Markets XTB
