Coming weeks may bring further strengthening of PLN

After a favorable period for equity, bond, and risky assets, including emerging market currencies, the global investor sentiment worsened in January and February. This also affected the złoty, which lost gains from the previous month. However, according to Łukasz Zembik, an analyst at OANDA TMS Brokers, the depreciation trend should come to an end. This was already evident towards the end of the month, as the Polish economy, despite weaker data, should not fall into recession. The strength of the dollar will be the decisive factor for the condition of the złoty, which will in turn depend on data from the US economy and the prospects for further interest rate hikes across the ocean.

January was one of the best starts to the year for financial markets. Investors continued their buying spree of stocks, bonds, and risky assets that they began in the last quarter of the previous year, indicating their optimistic outlook. The main reason for this was the decline in inflation in the United States. As a result, markets hoped for a softening of the hawkish stance of the Federal Reserve and a quick end to the cycle of interest rate hikes, despite assurances from most members of the Open Market Committee that they would fight inflation even at the risk of recession. However, February brought a deterioration in sentiment.

"The złoty weakened throughout February, but largely due to the global increase in risk aversion. We have seen a correction in the stock markets lately, including a correction in our main stock indices. In such an environment, when the US dollar gains in value, the currencies of emerging countries, including the Polish złoty, lose value," Łukasz Zembik, head of the Analysis Department at OANDA TMS Brokers, said.

(Newseria)