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Currency and Stock Markets Weekly Outlook

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EURPLN reaches all−time low

Mon, Jul 28 2008, 09:20 GMT
by Adam Narczewski

X-Trade Brokers, XTB

This past week lacked important macroeconomic information so local currencies followed the Eurodollar market. What was decisive were quarterly reports published by American companies and those were mostly worse than expected (Wachovia, Apple, Texas Instruments). Surprisingly, U.S equities markets reacted with a strong increase, which was an impulse for the dollar to gain value. Sentiment towards the American currency came back and the EUR/USD tumbled all the way to $1.5690 on Friday while at the beginning it remained way over the $1.59 level.

The Polish currency experienced big swings throughout the course of the week. The gaining dollar and decreasing risk aversion caused investors to pull their money out of emerging markets’ investments and put them into U.S equities. The Złoty tumbled and reached zł.3.2650 against the Euro and zł.20770 against the dollar. During the second part of the week, the local currency regained momentum. Core inflation in Poland grew to 3.4% while the market forecasted a 3.3% increase. Analysts expect that the Monetary Policy Council will hike interest rates next week on Tuesday by another 25 basis points to 6.25%. Such scenario is possible but the MPC might wait another month to see how the Polish economy is doing. Friday’s reports (unemployment remained at 9.6% and retail sales increased by 14.2%) showed that a major slowdown will not happen soon. The EUR/PLN finished the week at zł.3.2030 (all-time low) while the USD/PLN at zł.2.0410.

Published on  Mon, Jul 28 2008, 09:26 GMT