The PLN market - weekly overview

We had a rather calm week on the capital markets. Equity indices are reaching record highs and the investor’s sentiment is positive. The main event of the week was the publication of the Fed’s minutes, which turned out to be interesting. In the light of strong macroeconomic data, the Fed might be hiking interest rates one more time. This can happen soon if the situation does not change. To be honest, it is pretty refreshing listening to Janet Yellen being so hawkish. On the european political scene, the main actors are the presidential candidates in France. Financial markets are worried that Marine Le Pen (National Front) will win the elections, who by the way, is leading in the polls. The good news for investors came when Francois Bayrou quit the presidential race and gave his support to the leftist candidate - Emmanuel Macron. We will be closely following what is going on in France in the upcoming weeks.

In Poland, the unemployment rate was published - the reading of 8.6% in January is slightly better than expectations and it is another month that unemployment remains below 9%. What about the economy in 2017? J.P Morgan has just increased its forecast for Polish GDP growth to 3.4%, from the previous 3% in 2017 and to 3.2% (previously 3.1%) in 2018. The investment bank’s economists believe that the growth in Q1 of 2017 will be rather low, but the economy will speed up in the next three quarters (just to point out: the Polish central bank expects a GDP growth of 3.6% in 2017). J.P Morgan does not believe inflation will reach the central bank’s inflation target (2.5%). Rather, they expect a maximum of 2.2% this year. At the same time, J.P Morgan’s economist do not expect tightening of monetary policy, unless the inflation target is reached. Yes, this forecast seems reasonable. Getting back to this past week, how did the PLN currency pairs perform?

Looking at the daily EUR/PLN chart, we see the market was unable to break the 4.33 resistance (50% retracement level of this year downward move). It turned around reaching the expected 4.30 area. The stochastic oscillator is getting close to the “oversold” signal, but it seems the EUR/PLN will be heading towards this year’s lows of 4.27. Only some external news that could increase risk aversion, could push the market back to the 4.33 level.

Pic.1 EURPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets

Surprisingly, this time the USD/PLN was less volatile than the EUR/PLN. The market tested a couple of times the 4.09 resistance (38.2% retracement of this year’s downward move) but it retreated to the 4.06 area. For a larger move, the USD/PLN needs to break out from the 4.04 - 4.09 range (yellow rectangle). Breaking the support should take the market up to 4.12 while breaking the support could trigger a move towards the crucial 4.00 level.

Pic.2 USDPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets