The MPC keeps quiet and so does the złoty
Even a crucial event like the Monetary Policy Council (MPC) meeting had little impact on the złoty's performance.
The key issue last week was the rate-setting council meeting. The final decision had been widely predicted- the benchmark rate was kept unchanged at 6.5 percent. However, markets widely expected the MPC to signal a prompt change in its monetary bias from restrictive to neutral because of the strong currency, softening inflationary pressure and weakening growth- retail sales growth dropped in December to 2.8 percent, far behind the expected four percent, and the unemployment rate jumped unexpectedly from 18.7 to 19.1 percent.
This time the council gave no clear signals about its future moves. MPC member Dariusz Filar hinted on Thursday that a shift in policy stance should be expected any time from next month to May/June. The markets remained unsatisfied with those comments and the złoty was unmoved. Now the MPC is waiting for a new quarterly inflation projection (due in February) that should accelerate its decision to ease monetary policy.
In the coming days, the Polish currency is likely to follow moves on the international markets without any significant direction. However, soon investors should return to concerns about the general elections and its uncertain outcome, which will probably weigh negatively on the Polish currency.
The EUR/USD cross traded sideways 1.2940-1.3120, awaiting any significant comments about China's possible decision to let the yuan rise and eventually pull other Asiatic currencies higher against the greenback. The yuan is pegged to the dollar at a rate of 8.28. Top eurozone officials are unsatisfied with their counterparts from Asia who are unwilling to share the burden of the dollar's weakness. US Treasury Secretary John Snow showed little optimism about any new signals on the yuan's revaluation from the G7 rich nations. China's head of the National Bureau of Statistics, Li Deshui, reiterated that the country needed more time to let its currency flow more flexibly.
The greenback was supported by macro data. The Conference Board reported its U.S. consumer confidence index jumped to 103.4 in January, above investors' expectations. Also, better-than-expected durable-goods orders data and a weaker increase in U.S. jobless claims let the dollar hold gains. On the other hand the euro grew on German business sentiment. Index Ifo has reached its highest level (96.4 points) since February 2004. The outlook for German companies is getting better, owing to increasing domestic demand. Finally, on Friday GDP (3.1 percent in Q4) data disappointed investors who immediately weakened the U.S. currency.
Krzysztof Rup, Warsaw Investment Group (WGI)
The key issue last week was the rate-setting council meeting. The final decision had been widely predicted- the benchmark rate was kept unchanged at 6.5 percent. However, markets widely expected the MPC to signal a prompt change in its monetary bias from restrictive to neutral because of the strong currency, softening inflationary pressure and weakening growth- retail sales growth dropped in December to 2.8 percent, far behind the expected four percent, and the unemployment rate jumped unexpectedly from 18.7 to 19.1 percent.
This time the council gave no clear signals about its future moves. MPC member Dariusz Filar hinted on Thursday that a shift in policy stance should be expected any time from next month to May/June. The markets remained unsatisfied with those comments and the złoty was unmoved. Now the MPC is waiting for a new quarterly inflation projection (due in February) that should accelerate its decision to ease monetary policy.
In the coming days, the Polish currency is likely to follow moves on the international markets without any significant direction. However, soon investors should return to concerns about the general elections and its uncertain outcome, which will probably weigh negatively on the Polish currency.
The EUR/USD cross traded sideways 1.2940-1.3120, awaiting any significant comments about China's possible decision to let the yuan rise and eventually pull other Asiatic currencies higher against the greenback. The yuan is pegged to the dollar at a rate of 8.28. Top eurozone officials are unsatisfied with their counterparts from Asia who are unwilling to share the burden of the dollar's weakness. US Treasury Secretary John Snow showed little optimism about any new signals on the yuan's revaluation from the G7 rich nations. China's head of the National Bureau of Statistics, Li Deshui, reiterated that the country needed more time to let its currency flow more flexibly.
The greenback was supported by macro data. The Conference Board reported its U.S. consumer confidence index jumped to 103.4 in January, above investors' expectations. Also, better-than-expected durable-goods orders data and a weaker increase in U.S. jobless claims let the dollar hold gains. On the other hand the euro grew on German business sentiment. Index Ifo has reached its highest level (96.4 points) since February 2004. The outlook for German companies is getting better, owing to increasing domestic demand. Finally, on Friday GDP (3.1 percent in Q4) data disappointed investors who immediately weakened the U.S. currency.
Krzysztof Rup, Warsaw Investment Group (WGI)
