Pandora’s box of gold is wide open. Lockdown in Austria has been added to the catalog of problems of the Polish currency. It made investors seriously afraid of similar steps in Germany and other Western European countries. The effect is a decline in the stock markets of the Old Continent, a weakening of the euro (EUR / USD collapsed below 1.13), an increase in the franc and the continuation of a gradual, in fact, uninterrupted drift of EUR / PLN towards 4.70.
On Friday, the president of the National Bank of Poland gave PAP an interview about the weakness of the currency. It is mainly attributed to external factors (the strength of the dollar, which is unfavorable to the basket of emerging markets). Regardless of its sources, Adam Glapiński emphasized that “in the conditions of the current elevated inflation, further depreciation of the zloty would not be consistent with the interest rate policy”. However, it cannot be concluded from the statements that the monetary authorities are getting ready to intervene to stop the sell-off of the zloty. It should be remembered that in the last year the NBP (often with premeditation) surprised many times. In any case, the premium for the risk of a repeat of last year’s currency interventions in December should decrease.
At the moment, the position of the Polish currency is so unfavorable that its greatest chance to break out of the sell-off spiral may be Thanksgiving and a long weekend in the United States. It may bring some calming down and lower volatility in the core markets, but it may precede accelerated closing of positions before the end of the month. The dollar is heading towards the end of the month with impressive gains and some market participants will close positions and take profits.
The US economy regained momentum in the fourth quarter, and inflation accelerated sharply, reaching the highest in three decades. As a result, markets are starting to bet that asset purchases will come to an end faster than the plan presented just three weeks ago. This was confirmed by the last words of James Bullard, an influential Federal Reserve member. He suggested that a rate of quantitative easing reduction of not 15 but 30 billion dollars per month would be more appropriate. This is an issue that is important because the sooner the pandemic purchases become obsolete, the sooner the first interest rate hike will be possible. The market will look for indications regarding the openness of other monetary authorities to faster normalization in the minutes of the last FOMC meeting, published on Wednesday. Although the market may have galloped in the valuation of the tightening in the next two years, all the strengths now lie on the dollar side, and most of all the single currency is viewed extremely negatively.
Speaking of the euro, let us note that in Europe, the center of attention will be business barometers, which will tell us how strongly it inhibits economic growth. PMI indices will be released tomorrow, and on Wednesday the German index of the IFO institute. In the domestic market, the series of macroeconomic publications will be launched with today’s reading of industrial production. On Tuesday, we will get data on retail sales, and on Thursday on the unemployment rate. The foundations of the zloty are weakening: economic growth next year becomes more threatened, the situation in the balance of payments worsens. Nevertheless, only strong disappointment with the readings should have an impact on the zloty.