Inflation surprise fuels dip in złoty's value
He added that he was expecting a prompt change in the central bank's official monetary policy bias from restrictive to neutral. It looked as if the inflation report was to determine the currency outlook.
Surprising figures
And so it was. The January data came in far behind expectations. Inflation slowed to four percent from 4.4 percent.
Investors were highly surprised with those figures and started buying debt assets. The prospects for rate cuts became visible. Lower rates would result in a narrower yield spread over foreign assets and weigh negatively on the currency.
Remaining immune
On Wednesday the prompt surge in bond prices ended. The złoty was also lower. The market remained immune to dovish comments from central bank member Stanisław Nieckarz saying rates should fall by 25-75 basis points this year. Investors were already convinced the expectations for immediate monetary policy easing came too early.
On Friday afternoon o1 cost zł.3.99 and $1 cost zł.3.05.
It is probable that the EUR/PLN will be traded in the zł.3.95-4.04 range, and the USD/PLN between zł.3.03-3.09.
Bad days
The greenback failed to continue its recent climb. The EUR/USD was unable to break below the key level of e1.2750. The market returned above e1.3000. The dollar had some bad days despite US net capital inflow data being in line with market expectations.
The key issue this week was Federal Reserve chairman Alan Greenspan's testimonies to Congress. On Wednesday there was no surprise. Greenspan reiterated that the US economy was expanding at a healthy pace. The governor signaled there would be further monetary tightening but there was nothing about its pace. After a brief rally the greenback had to surrender.
Ignoring data
Not surprisingly, the PPI data released on Friday was higher than expected, thus increasing the probability of interest rate hikes. The dollar reacted positively, but returned above $1.3050 later. The sentiment is clearly against the US currency, since the market is ignoring good US data and only reacting to bad figures.
The EUR/USD should continue to rise in the next days. The first important resistance level is December's high of $1.3650. This should be a target for euro bulls.
Krzysztof Rup, Warsaw Investment Group (WGI)
Surprising figures
And so it was. The January data came in far behind expectations. Inflation slowed to four percent from 4.4 percent.
Investors were highly surprised with those figures and started buying debt assets. The prospects for rate cuts became visible. Lower rates would result in a narrower yield spread over foreign assets and weigh negatively on the currency.
Remaining immune
On Wednesday the prompt surge in bond prices ended. The złoty was also lower. The market remained immune to dovish comments from central bank member Stanisław Nieckarz saying rates should fall by 25-75 basis points this year. Investors were already convinced the expectations for immediate monetary policy easing came too early.
On Friday afternoon o1 cost zł.3.99 and $1 cost zł.3.05.
It is probable that the EUR/PLN will be traded in the zł.3.95-4.04 range, and the USD/PLN between zł.3.03-3.09.
Bad days
The greenback failed to continue its recent climb. The EUR/USD was unable to break below the key level of e1.2750. The market returned above e1.3000. The dollar had some bad days despite US net capital inflow data being in line with market expectations.
The key issue this week was Federal Reserve chairman Alan Greenspan's testimonies to Congress. On Wednesday there was no surprise. Greenspan reiterated that the US economy was expanding at a healthy pace. The governor signaled there would be further monetary tightening but there was nothing about its pace. After a brief rally the greenback had to surrender.
Ignoring data
Not surprisingly, the PPI data released on Friday was higher than expected, thus increasing the probability of interest rate hikes. The dollar reacted positively, but returned above $1.3050 later. The sentiment is clearly against the US currency, since the market is ignoring good US data and only reacting to bad figures.
The EUR/USD should continue to rise in the next days. The first important resistance level is December's high of $1.3650. This should be a target for euro bulls.
Krzysztof Rup, Warsaw Investment Group (WGI)
