Currency report: Consolidation trend

After reaching the level of 1.59 on March 17, it seemed that it would be hard for the market to push the euro higher without great difficulty.

Indeed, on Monday, March 31, the market tried to test the record and proved unsuccessful. The outcome suggests that we will see a longer consolidation period than previously expected.

The ceiling remains 1.59, while a strong line of support is at 1.5350. The currency pair would probably be heading to challenge that ceiling if not for the recent US payrolls report, which was again weaker than expected and pushed the EUR/USD below 1.57. This awkward reaction shows that the market may not be strong enough at the moment to approach new records any time soon.

In the meantime, the Polish currency did well last week. The currency managed to gain against both the euro and the dollar as investors looked forward to another rate hike. 

There was also some negative news, however, as the policy-setters last week announced that Poland's inflation rate would push it above the Maastricht Treaty criteria for euro adoption, but that appeared to have little affect on the currency. Inflation is expected to slow by the end of the year, and could fall below the Maastricht threshold at year's end or in early 2009.

Przemysław Kwiecień, X-Trade Brokers Dom Maklerski SA