Aforti Exchange

Market Summary by AFORTI: Mixed Economic Signals, Inflation Under Control, Expectations for Rate Cuts

5 August 2024

Macroeconomic Situation

The last week of July and the beginning of August brought a number of important macroeconomic events that affected global capital and financial markets. Data on inflation, GDP and central bank decisions were key for investors.


Poland

  • Inflation: inflation in Poland rebounded, but slower than expectations, which may affect future monetary policy decisions by the National Bank of Poland (NBP). The y/y reading came in at 4.2% vs. 4.4% expected, and the monthly reading came in at 1.4% vs. 1.6%
  • PMI: Poland's PMI showed a recovery, which is a positive sign for the economy. For July, it came in at 47.3 points with a minimal rebound expected to 45.1 from 45. This is the highest reading since February this year. The PMI has remained below 50 points since last June. 


Europe

  • Germany: Germany's GDP came in slightly below expectations, which may suggest a slowdown in Europe's largest economy. Quarterly GDP: -0.1% k/k (expected: 0.1% k/k; previous: 0.2% k/k). Inflation, on the other hand, was slightly above expectations, showing continued price pressures. German CPI (y/y) July (preliminary data): 2.3% (2.2% expected; previously: 2.2%)
  • Eurozone: In the Eurozone, inflation data were also slightly above forecasts, confirming the continuing inflationary trend in the region. CPI inflation for July: Currently: 2.6% y/y. Forecast: 2.5% y/y vs. 2.5% previously. Eurozone PMIs were slightly above preliminary readings, indicating a slight improvement in the service and industrial sectors. Eurozone PMI: 45.8 (preliminary: 45.6; previous: 45.8)
  • Spain: Inflation in Spain fell more sharply than expected, which may indicate the effectiveness of measures to reduce price pressures. CPI inflation for July fell to 2.8% y/y against expectations of 3.0% y/y and the previous level of 3.4% y/y. In contrast, GDP surprised positively, which is a good sign for the country's economy. Q2 annualized GDP: 2.9% y/y (expected: 2.5% y/y; previous: 2.6% y/y)
  • United Kingdom: The UK PMI came in above expectations, indicating an improvement in the services sector. UK Manufacturing PMI: Value for July: 52.1; Forecast: 51.8; Previously: 50.9. The Bank of England cut interest rates as expected, causing the pound to weaken (GBP/USD fell nearly 0.7%).


US

  • Monetary policy: the Federal Reserve (Fed) left interest rates unchanged, causing the dollar to strengthen slightly. Fed Chairman Jerome Powell stressed at a press conference that inflation had fallen significantly and the labor market had become more balanced, suggesting a possible rate cut in September.


Foreign Exchange Market

The zloty in the period from July 29 to August 02 basically did not change much. The EUR/PLN exchange rate oscillated in the range of 4.28 - 4.29, reaching 4.295 at times, and the USD/PLN in the range of 3.95-3.96, reaching 3.98 at times. 

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Oil and Gold Market

Brent crude oil prices from July 29 to August 02 remained in a USD 80.62-77.46 per barrel range, indicating a market decline. Gold prices slightly rose from USD 2,445 to USD 2,483 per ounce.

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Stock Exchange

The WIG from July 29-August 02 recorded a decline of about 2,700 points, ending the session at 81,649 points with a weekly turnover of 5,198,184,688. Investors continue to monitor the macroeconomic situation and central bank decisions that may affect further movements of the index. It was a week of declines on the WSE.

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Summary

The last week of July and early August 2024 brought mixed signals from the world's major economies. The slowdown in Germany contrasted with positive GDP data from Spain. In the U.S., monetary policy remains stable and inflation is falling, which could lead to interest rate cuts in the future. The strengthening of the dollar and the weakening of the pound were key developments in the currency markets. Investors continue to keep a close eye on the macroeconomic situation and central bank decisions, which may influence further market movements.


TREASURY DEPARTMENT

AFORTI.BIZ

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