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Market Summary by AFORTI: Global Economic Uncertainty Impacts Markets - Weaker Dollar, ECB Caution, and Declines on Warsaw Stock Exchange

26 August 2024

Macroeconomic Situation

Europe

- Eurozone: Eurozone final CPI inflation for July 2024 was in line with expectations, which did not trigger much market movement. Eurozone CPI (y/y): value: 2.6%; forecast: 2.6%; preliminary reading: 2.6%; previous: 2,5% 

- In its minutes, the ECB indicated a cautious approach to further monetary easing, stressing the importance of the September meeting for further interest rate decisions. The euro weakened slightly after the announcement.

- PMI indicators: for the main economies show further weakness: 

  • Industrial PMI from Germany: 42.1 (expected: 43.5; previous: 43.2)
  • Services PMI from Germany: 51.4 (expected: 52.3; previous: 52.5)
  • Industrial PMI from France: 42.1 (expected: 44.4; previous: 44)
  • Services PMI from France: 55 (expected: 50.3; previous: 50.1)


Poland: 

- In Poland, wage growth has turned out to be below expectations, which may have a downward impact on inflationary pressures. Wage growth: currently: 10.6% y/y; expected: 10.8% y/y; previously: 11.0% y/y. 

- Retail sales, on the other hand, were also weaker than forecast, indicating a deterioration in consumer sentiment and a slowdown in economic growth. Poland's retail sales for July increase by 5.0% y/y (expected: 6.0% y/y; previous: 4.7% y/y)


USA

- Employment: US employment data came in significantly weaker than forecast, with the number of employed people 818,000 lower than expected. This affected expectations for future Federal Reserve decisions.

- Fed Minutes: the minutes of the last Fed meeting revealed a desire to cut interest rates as early as September, which weakened the dollar. In turn, during a symposium in Jackson Hole, Fed Chairman Jerome Powell suggested that the time for monetary policy adjustment is near, which caused US equity markets to rise and the dollar to weaken further. The minutes are clearly dovish in tone and confirm markets' expectations of interest rate cuts. At the same time, however, FOMC members are not considering larger cuts than 25 bps. 

- PMI indicators: Mixed PMI data for the US underlines the continued difficulties in the major economies, which further affected the volatility in the financial markets. 

  • PMI for manufacturing: 48 (expected: 49.6; previous: 49.6);
  • PMI for services: 55.2 (expected: 54; previous: 55)


Foreign exchange market

Between 19 and 23 August, the zloty weakened against the euro and strengthened against the US dollar. The EUR/PLN exchange rate oscillated in the range of 4.26 - 4.27, recording volatility of up to almost 3gr, and the USD/PLN in the range of 3.86-3.84. 

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Oil and gold market

Brent crude oil prices from 19 - 23 August remained in the USD 79.72-79.03 per barrel range, indicating a slight market decline, although the market showed high volatility during the week. Gold prices increased slightly from USD 2542.60 to USD 2545.60 per ounce, although the market showed volatility during the week and recorded increases to almost USD 2562.15 per ounce.

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Stock Exchange

The WIG from 19 to 23 August recorded a drop of around 360 points, ending the session at 84,158 points with a weekly turnover of 5,258,831,791. It was a week of light volatility on the WSE albeit with relatively lower turnover than usual.

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Summary

The week of 19-23 August 2024 brought significant developments in equity markets. Data from the US, particularly on employment and PMIs, pointed to a possible economic slowdown, which influenced the dollar to weaken and equity markets to rise in anticipation of interest rate cuts. In Europe, the ECB's cautious approach to further monetary easing brought uncertainty to the market. The WSE saw declines and gold gained in value, reflecting global investor sentiment awaiting key central bank decisions.


TREASURY DEPARTMENT

AFORTI.BIZ

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