Market summary according to AFORTI: MPC decisions in line with expectations, readings of the American economy and the WSE in anticipation of upward movements
The beginning of 2024 did not bring any big surprises on the financial markets. In Poland, of course, there was interest in what decision the Monetary Policy Council would make regarding interest rates. At the same time, no one expected a surprise and in fact - the Monetary Policy Council made the decision expected by the financial markets to leave interest rates unchanged. This did not come as a surprise to the markets, although after the latest inflation reading of 6.1% on an annual basis, analysts wondered whether this would influence the decision.
During the conference, the President of the NBP suggested that we will be within the inflation target already in March, but also confirmed that the 3rd and 4th quarter may bring us its rebound and a sharp increase - even up to 8% - due to the end of the protective period with zero VAT on food and beverages. ending electricity subsidies. In this context, statements about a "flourishing economy and non-existent m/m inflation" were rather self-promotion of the activities of the Monetary Policy Council/NBP. Comparisons to other countries intended to highlight successes included no references to the EU and the USA, and the President of the NBP focused only on comparisons to Hungary and Slovakia. It should also be admitted that the information about a potential increase in inflation to 8% as opposed to the words about "non-existent inflation" sounds quite divergent.
From the Polish market, this was practically the most important information. We had no important information coming from the government zones. Currently, the most important issue is the budget - which, let us remind you, must be submitted for signature by the President by the end of January 2024. Failure to submit this document for signature may result in shortening the term of office of Parliament and calling early elections. However, the government assures that despite the postponement of the Sejm session, the date remains unthreatened. We will probably get more information next week, when MPs will start debating the budget's revenues and expenses.
Last week we mainly observed signals coming from the US economy. The basic information was inflation data for December. The forecasts showed that the CPI (consumer goods inflation) was slightly different from the previous month. Expectations estimated a change from 3.1% to 3.2% (measured y/y). Meanwhile, growth reached 3.4%, and at the same time core inflation fell less than expected - to 3.9% vs. the consensus of 3.8%. The differences may not seem significant, but these signals show that inflation is still a problem. In this light, a question should be asked about the cycle of declines in interest rates forecast for 2024. Last year's forecasts included three cuts of 25 basis points each. We should wait for the January data, but looking at the current data, the Fed may be a bit more cautious with cuts.
When it comes to currencies, we are dealing with rates remaining within our forecasted corridors. The zloty continues to move in the 4.3300-4.3650 corridor, meeting the expectations of both importers and exporters, where the latter have already completed some of the futures contracts at higher levels. Since we do not expect any data that could move the market next week, we will once again maintain our forecast for "range trading" EUR/PLN in the range of 4.3300-4.3700.
EUR/PLN over the last 7 days
Looking at the American currency, the dollar, which corrected as a result of movements on EUR/USD, remained above the USD/PLN 3.9400 level, but at the same time stopped at the USD/PLN resistance of 3.9900. Since we were dealing with a correction of the main currency pair, we do not currently expect the dollar to break above USD/PLN 4.0000. Our outlook for USD/PLN for the next week is USD/PLN 3.9500-3.9000.
USD/PLN over the last 7 days
The above-mentioned EUR/USD quotations from the initial levels reaching EUR/USD 1.1130, we observed a strong correction to around 1.0900. The dollar was gaining due to better macroeconomic data readings than in Europe. Currently, we do not expect that there will be a strong break below the EUR/USD support of 1.0900, but the resistance at 1.1000 should not be broken in the coming week. Due to the holiday of January 15 (Martin Luther King's Day), Monday will also be a day when the dollar turnover will be significantly smaller - and therefore we do not expect any sudden movements.
EUR/USD over the last 7 days
Looking at the commodity markets - especially BRENT crude oil, we saw a short correction to around USD 80/barrel, after which prices calmed down and returned to around USD 78/barrel. These movements were caused both by the prolonged conflict in the Gaza Strip, but also by airstrikes by US and British troops on Houthi rebel positions in Yemen. This was a reaction to attacks on merchant ships passing through the Red Sea on the trade route through the Suez Canal.
BRENT crude oil – last week USD/barrel
Gold - still remains an attractive asset, despite short corrections to around USD 2,010/ounce. Currently, the level of USD 2,050-2,060 per ounce seems to be quite stable due to the still high interest of investors.
Finally, a short look at the stock markets. At the WSE, the beginning of the year is marked by a correction related to profit taking and portfolio changes. The WIG index, which reached almost 80,000 at the end of the year, corrected by almost 4,000 points. This looks like some kind of backtracking to take a run-up. Let us recall that some analysts predict that 2024 may bring index values of 100,000. On WIG20, we observe the level of 2.250 after the correction and it is expected that we will soon return to upward trends.
Szymon Jańczak
Director of the Treasury Department
AFORTI.BIZ