Politics and currencies go hand in hand
The price of the US currency also rose due to its strengthening on the international markets. The USD/PLN cross ended last week at zł.3.13. The meeting between the central bank and Ministry of Finance had no impact on the złoty.
Due to a lack of important macro data, market participants focused on politics. Investors were convinced that general elections were definitely to be held in autumn. However, the rumors that Economy Minister Jerzy Hausner was likely to leave the government after he had decided to leave the ruling leftist party made investors nervous and many decided to take profits. The sentiment got even worse when the lower-house Speaker, Włodzimierz Cimoszewicz, signaled that elections were still possible before the summer. Talks about a new party and that the Prime Minister may join it negatively influenced Polish currency.
In the coming days the złoty should again follow events on the international markets. There is no clear trend now but the currency's current holders should be aware of further tensions in political circles and rumors of an early election. Every time there was a significant change on the political front the Polish currency had bad days.
On the international market the dollar managed to keep its recent gains although the macro data was not in its favor. The EUR/USD dropped to $1.2730, but then traded sideways $1.285-1.290. The sentiment for the US currency was still positive after Fed governor Alan Greenspan signaled that market forces and greater US budget discipline may help to narrow the US current-account gap.
The long-awaited final outcome of the G7 meeting had little impact on currencies. There were no new developments on China. China's top monetary official reiterated that there was still much preparation needed to change the currency regime. Investors were unsatisfied with the statement but the reaction on the market was muted.
The greenback was supported by the comments of Atlanta Fed president Jack Guynn who said the Fed may change its tone soon. If the word "measured" is removed from the official statement, indications are that monetary tightening may speed up. This would promptly boost the US currency. All week markets eyed the December trade-deficit data. Although the data was in line with expectations it failed to dispel concerns about US structural problems. After a short rally, the dollar ran out of steam. The twin deficits still remain a crucial factor and are weighing heavily on the dollar.
Markets remain confused about future trends. In the first weeks of this year the dollar was victorious. Investors expected the Fed to accelerate fiscal tightening. Alan Greenspan's comments on the trade gap boosted the dollar but after the December trade data, investors remained unconvinced. In the coming days the greenback should be in good shape. However, a return to above $1.30 against the euro is less likely than it testing the $1.27 bottom line.
Krzysztof Rup, Warsaw Investment Group (WGI)
Due to a lack of important macro data, market participants focused on politics. Investors were convinced that general elections were definitely to be held in autumn. However, the rumors that Economy Minister Jerzy Hausner was likely to leave the government after he had decided to leave the ruling leftist party made investors nervous and many decided to take profits. The sentiment got even worse when the lower-house Speaker, Włodzimierz Cimoszewicz, signaled that elections were still possible before the summer. Talks about a new party and that the Prime Minister may join it negatively influenced Polish currency.
In the coming days the złoty should again follow events on the international markets. There is no clear trend now but the currency's current holders should be aware of further tensions in political circles and rumors of an early election. Every time there was a significant change on the political front the Polish currency had bad days.
On the international market the dollar managed to keep its recent gains although the macro data was not in its favor. The EUR/USD dropped to $1.2730, but then traded sideways $1.285-1.290. The sentiment for the US currency was still positive after Fed governor Alan Greenspan signaled that market forces and greater US budget discipline may help to narrow the US current-account gap.
The long-awaited final outcome of the G7 meeting had little impact on currencies. There were no new developments on China. China's top monetary official reiterated that there was still much preparation needed to change the currency regime. Investors were unsatisfied with the statement but the reaction on the market was muted.
The greenback was supported by the comments of Atlanta Fed president Jack Guynn who said the Fed may change its tone soon. If the word "measured" is removed from the official statement, indications are that monetary tightening may speed up. This would promptly boost the US currency. All week markets eyed the December trade-deficit data. Although the data was in line with expectations it failed to dispel concerns about US structural problems. After a short rally, the dollar ran out of steam. The twin deficits still remain a crucial factor and are weighing heavily on the dollar.
Markets remain confused about future trends. In the first weeks of this year the dollar was victorious. Investors expected the Fed to accelerate fiscal tightening. Alan Greenspan's comments on the trade gap boosted the dollar but after the December trade data, investors remained unconvinced. In the coming days the greenback should be in good shape. However, a return to above $1.30 against the euro is less likely than it testing the $1.27 bottom line.
Krzysztof Rup, Warsaw Investment Group (WGI)
