Currency report: A week of challenges

Przemysław Kwiecień, X-Trade Brokers Dom Maklerski SA

At the end of April, we witnessed a major change in sentiment on the forex. After numerous attempts, the euro broke through the psychological $1.60 level, scoring a new record at $1.6018.

However, the market was clearly uncertain if yet another wave of dollar depreciation might occur or how monetary authorities might respond to it. As a result, the EUR/USD didn't manage to stay above the $1.60 threshold.

As the EUR/USD fell, it sparked a noticeable sell-off on the Polish market. The złoty was down almost two percent to the dollar and 0.3 percent to the euro on the whole week ending April 25, after scoring a multi-year high to the dollar early in the week.

Later in the week, the US currency was bolstered by better-than-expected earnings results and a drop in initial jobless claims, as well as unexpectedly low data from the Ifo Business Climate Index in Germany. The euro was 1.5 percent down on the week and more than 2.5 percent down from its peak, while the Swiss franc lost over 1.5 percent and the Japanese yen 0.6 percent.

In the near future, we'll see how strong a correction will occur on the markets after US GDP data and energy giants' results are published for Q1. The Federal Reserve's interest-rate decision will also have an effect.

The May holiday should also bring a period of relative calm as investors await the Polish Monetary Policy Council's decision. This time, the council is expected to leave the rates unchanged.