Investors and central bank bide their time as złoty strengthens
The EUR/PLN cross slumped to E3.96, a multi-month low. The USD/PLN cross traded between $3.06 and $3.12.
Yet, on Monday, the złoty was hurt by a weaker than expected 2004 economic growth figure (5.4 percent). Investors also worried about the possible delay of the privatization of insurer PZU. The market was surprised by the ruling leftists' decision to postpone the general elections until autumn. Investors would appreciate it if Marek Belka's government continues its mission. However, the new government would have less time to introduce significant reforms in 2006. The situation is mixed and the markets are still watching closely for any signals from the ruling party.
The Economy Minister, Jerzy Hausner, who is always worried about exporters, called on the central bank to change its monetary policy stance to curb the złoty's strength. On the other hand, Finance Minister Mirosław Gronicki claimed there was no threat from the złoty to this year's growth target of five percent. The central bank policymakers and government officials were due to discuss the złoty's rate and the euro adoption on Monday. The Monetary Policy Council is widely expected to ease its policy stance from restrictive to neutral in the coming months and the central bank is unlikely to step into the market and influence the złoty.
Now investors are eagerly awaiting January's inflation and industrial output data, which may give the złoty new direction.
Last week was full of important data and events on the international markets. Investors focused mainly on the Fed's rate decision, the U.S. payroll data and the G7 meeting. The EUR/USD cross traded between $1.29-$1.31, but the greenback was more favored. Traders were rather reluctant to open new positions ahead of new job-market data and the outcome of the G7 meeting.
The Fed's decision to raise rates by a quarter-percentage point to 2.5 percent was widely expected and had little impact on the dollar. Shortly before the decision, the dollar gained on value against major currencies but the final outcome of the Fed's meeting was unsatisfactory for investors. However, Alan Greenspan, the chairman of the Federal Reserve board of governors, delivered no signals that the central bank was considering a rate raise acceleration.
On Thursday, the ECB decided to leave rates unchanged at a record low two percent in the eurozone. Both the ECB and Fed are likely to continue their monetary policies in the coming months. This makes dollar-dominated assets even more attractive to investors and it should help the greenback avoid a downward path.
Krzysztof Rup, Warsaw Investment Group (WGI)
Yet, on Monday, the złoty was hurt by a weaker than expected 2004 economic growth figure (5.4 percent). Investors also worried about the possible delay of the privatization of insurer PZU. The market was surprised by the ruling leftists' decision to postpone the general elections until autumn. Investors would appreciate it if Marek Belka's government continues its mission. However, the new government would have less time to introduce significant reforms in 2006. The situation is mixed and the markets are still watching closely for any signals from the ruling party.
The Economy Minister, Jerzy Hausner, who is always worried about exporters, called on the central bank to change its monetary policy stance to curb the złoty's strength. On the other hand, Finance Minister Mirosław Gronicki claimed there was no threat from the złoty to this year's growth target of five percent. The central bank policymakers and government officials were due to discuss the złoty's rate and the euro adoption on Monday. The Monetary Policy Council is widely expected to ease its policy stance from restrictive to neutral in the coming months and the central bank is unlikely to step into the market and influence the złoty.
Now investors are eagerly awaiting January's inflation and industrial output data, which may give the złoty new direction.
Last week was full of important data and events on the international markets. Investors focused mainly on the Fed's rate decision, the U.S. payroll data and the G7 meeting. The EUR/USD cross traded between $1.29-$1.31, but the greenback was more favored. Traders were rather reluctant to open new positions ahead of new job-market data and the outcome of the G7 meeting.
The Fed's decision to raise rates by a quarter-percentage point to 2.5 percent was widely expected and had little impact on the dollar. Shortly before the decision, the dollar gained on value against major currencies but the final outcome of the Fed's meeting was unsatisfactory for investors. However, Alan Greenspan, the chairman of the Federal Reserve board of governors, delivered no signals that the central bank was considering a rate raise acceleration.
On Thursday, the ECB decided to leave rates unchanged at a record low two percent in the eurozone. Both the ECB and Fed are likely to continue their monetary policies in the coming months. This makes dollar-dominated assets even more attractive to investors and it should help the greenback avoid a downward path.
Krzysztof Rup, Warsaw Investment Group (WGI)
