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Currency and Stock Markets Weekly Outlook

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Weekly Currency Brief

Fri, May 16 2008, 15:30 GMT
by Adam Narczewski

X-Trade Brokers, XTB

Currency markets are pretty volatile recently and it was no different this past week. These big swings were caused by the inflation reports published in the United States, the Euro zone, the UK and Poland.

In the Euro zone CPI inflation stayed unchanged at 3.3% (on a yearly basis), which is way above the 2.0% limit set by the European Central Bank (ECB). High inflation is a problem since the European economy is slowing down and an interest rate cut seems reasonable. Right now, the chances for such move by the ECB declined causing the Euro to strengthen. At the same time, CPI inflation in the U.S declined to 0.2% on a monthly basis, which was lower than forecasted. During the course of the week, the EUR/USD advanced from $1.5390 to $1.5485 reaching even $1.5560 on Monday. It seems that this is just a corrective movement and soon the American dollar will keep strengthening.

As usual, investors experienced big swings on the Złoty market. This past week the Polish currency reached new records against the Euro at zł.3.3745 and the American dollar at zł.2.1665 on Tuesday. The Złoty started losing value on Wednesday when we learned that CPI inflation in Poland dropped to 4.0% on a yearly basis against the forecasted 4.1%. Such reading lowers the chances for an interest rate hike by the Polish Monetary Policy Council in May or even June. The Złoty ended the week at zł.3.3855 against the Euro and at zł.2.1845 against the dollar.

Published on  Fri, May 16 2008, 15:32 GMT