Market Summary by AFORTI: Cabinet meeting, draft budget for 2026, parliamentary crisis in France

2025-09-01

Last week, financial markets were influenced by several key events. Poland saw an increase in retail sales and a decline in inflation. The euro (EUR) maintained its value against the Polish zloty (PLN), while the US dollar (USD) strengthened. In the political context, the President expressed concern about the high budget deficit, and a member of the Monetary Policy Council expressed scepticism about interest rate cuts, which increased market volatility. The president expressed concern about the high budget deficit, and a member of the Monetary Policy Council expressed scepticism about interest rate cuts, which increased market volatility. On the Polish stock exchange, the WIG index fell, as did the price of Bitcoin. In France, the parliamentary crisis and a possible vote of no confidence in the government may have a negative impact on the euro.

Economic indicators

Poland

1. Retail sales (y/y) (Jul): value 4.8%; forecast 3.5%; previous 2.1%;

2. M3 money supply (y/y) (Jul): actual 10.8%; forecast 10.6%; previous 10.5%;

3. Unemployment rate (Jul): actual 5.4%; forecast 5.4%; previous 5.2%;

4. Car registrations (y/y) (Jul): value 16.50%; previous -1.30%;

5. Car registrations (m/m) (Jul): value 1.40%; previous 6.30%;

6. CPI (y/y) (Aug): value 2.8%; previous 3.1%;

7. CPI (m/m) (Aug): value -0.1%; previous 0.3%;

Eurozone

1. Consumer confidence index (September): value -15.5; forecast -15.5; previous -14.7;

2. M3 money supply (y/y) (Jul): value 3.4%; forecast 3.5%; previous 3.3%;

3. Loans to the private sector (y/y) (Jul): value 2.4%; forecast 2.4%; previous 2.2%;

Germany

1. Business expectations (Aug): value 91.6; forecast 90.2; previous 90.8;

2. Ifo business climate index (Aug): actual 89.0; forecast 88.7; previous 88.6;

3. Current assessment of business situation (Aug): actual 86.4; forecast 86.7; previous 86.5;

4. GfK consumer confidence index (September): value -23.6; forecast -21.5; previous -21.7;

5. Change in unemployment (August): value -9K; forecast 10K; previous 2K;

6. Unemployment rate (Aug): actual 6.3%; forecast 6.3%; previous 6.3%;

France

1. GDP growth (q/q) (Q2): actual 0.3%; forecast 0.3%; previous 0.1%;

2. GDP growth (y/y) (Q2): value 0.8%; forecast 0.7%; previously 0.6%;

3. Consumer price index (m/m) (Aug): value 0.4%; forecast 0.5%; previously 0.2%;

4. Harmonised index of consumer prices (m/m) (Aug): value 0.5%; forecast 0.5%; previous 0.3%;

5. Consumer confidence (Aug): value 87; forecast 90; previous 88;

6. Consumer spending growth (m/m) (Jul): actual -0.3%; forecast -0.3%; previous 0.4%;

United Kingdom

1. BRC shop price index (y/y): actual 0.9%; forecast 0.9%; previous 0.7%;

2. Durable goods orders (m/m) (Jul): value -2.8%; forecast -3.8%; previous -9.3%;

3. Number of applications for unemployment benefits: value 229K; forecast 231K; previous 234K;

4. GDP growth (q/q) (Q2): value 3.3%; forecast 3.0%; previous -0.5%;

5. PCE price index (y/y) (Jul): value 2.9%; forecast 2.9%; previous 2.8%;

6. PCE index (y/y) (July): actual 2.6%; forecast 2.6%; previous 2.6%;

7. University of Michigan consumer sentiment index (August): actual 58.2; forecast 58.6; previous 61.7;

8. Consumer Expectations Index (Aug): actual 55.9; forecast 57.2; previous 57.7;

9. PCE Price Index (MoM) (Jul): actual 0.3%; forecast 0.3%; previous 0.3%;

10. Personal spending (m/m) (Jul): actual 0.5%; forecast 0.5%; previous 0.4%;

China

1. Manufacturing PMI (Aug): actual 49.4; forecast 49.5; previous 49.3;

Currency market

This week, after moderate fluctuations, the euro (EUR) maintained its value against the Polish zloty (PLN). The euro price fluctuated between 4.2543 and 4.2748.

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The dollar (USD), on the other hand, after significant increases, ultimately strengthened against the Polish zloty (PLN) by 0.27%. The price of the dollar fluctuated between 3.6309 and 3.6909.

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Oil and gold market

The price of BRENT crude oil fell by 0.47%. The price fluctuated between 66.40 and 68.46 USD/barrel.

Gold, on the other hand, rose by 2.94%, reaching its highest value ever. The price of gold fluctuated between 3397.20 and 3518.02 USD/ounce.

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Stock Exchange

The WIG index fell by 2.67%. The price of the WIG index fluctuated between 104,696 and 109,015.

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Cryptocurrencies

The price of Bitcoin (BTC) fell by 2.61%, dropping below PLN 400,000. The price of Bitcoin fluctuated between PLN 385,000 and PLN 413,531.

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Important events of the past week

Draft budget for 2026: The government has presented key data on the draft state budget for 2026, which has triggered a reaction from the markets. The projected deficit of the central and local government sectors in 2025 is expected to amount to 6.9% of GDP, falling to 6.5% of GDP in 2026. However, this reduction is possible as a result of raising the initial deficit target for 2025. The planned net borrowing requirements for 2026 will increase significantly, which has resulted in higher yields on Polish government bonds. The increase in debt and high borrowing requirements are putting pressure on bond yields, which is negatively affecting the valuation of the Polish zloty (PLN), weakening it.

MPC scepticism about interest rates: In an interview, Monetary Policy Council (MPC) member Iwona Duda expressed scepticism about interest rate cuts in September, introducing uncertainty. Her statement contradicts earlier signals from another MPC member. An additional factor raising doubts is the draft budget for 2026, which may be perceived as a sign of expansionary fiscal policy, limiting the possibility of monetary policy easing. This uncertainty about future decisions increases volatility in the currency market, affecting investor sentiment towards the Polish zloty (PLN).

Parliamentary crisis in France: Prime Minister François Bayrou's government in France is on the verge of collapse as the opposition has announced that it will not give it a vote of confidence. France has one of the highest debt servicing costs in the Eurozone, and investors are losing confidence in the stability of its finances. Prime Minister Bayrou took the risk of a vote to consolidate support for spending cuts. Political instability in such a large economy generates market uncertainty, which may negatively affect the single currency, the euro (EUR).

Cabinet Council: The first meeting of the Cabinet Council chaired by Polish President Karol Nawrocki was held at the Presidential Palace, convened to discuss matters of particular importance. The main topics were the state of the national budget, public finances and the government's plans for key development investments and the protection of Polish agriculture. The President expressed concern about the high budget deficit and announced that he would not agree to tax increases. Despite this, the finance minister presented forecasts indicating a further increase in public debt to 66.8% of GDP by the end of 2026. According to the head of the President's Office, the President and the government remain at odds on key budgetary issues, and the President will demand written answers.

Events worth watching this week

Outlook for the zloty: The Polish zloty (PLN) may experience volatility on Monday, 1 September, and Wednesday, 3 September. At 9:00 am on Monday, the PMI index for industry for August will be published. Then, at 10:00 a.m., GDP data (y/y) and (m/m) for the second quarter will be released. On Wednesday, at 2:00 p.m., the key event will be the interest rate decision, which has a direct impact on the value of the currency and may lead to significant market movements.

Outlook for the euro: On Monday, 1 September, the key events will be the publication of PMI indices for industry in France and Germany, scheduled for 9:50 and 9:55 respectively. On Tuesday, 2 September, the markets will focus on the publication of inflation indices. At 11:00, data on the CPI and core CPI for the Eurozone for August will be released. On Wednesday, 3 September, at 10:00, S&P Global's composite PMI index will be published. On Thursday, 4 September, at 11:00, data on retail sales in the Eurozone for July will be released. On Friday, 5 September, important data on German factory orders will be released at 8:00 a.m. and Eurozone GDP at 11:00 a.m. Additional volatility may be caused by numerous speeches by European Central Bank (ECB) representatives, including Schnabel and President Lagarde.

Outlook for the dollar: The US dollar (USD) may be influenced by a number of events throughout the week. On Tuesday, 2 September, markets will focus on the release of the manufacturing PMI and ISM manufacturing index. On Wednesday, 3 September, the key indicator will be the Job Openings and Labour Turnover Survey (JOLTS), which is a measure of the health of the labour market and could cause volatility. On Thursday, 4 September, ADP non-farm employment changes will be released, followed by jobless claims, which will provide further information on the labour market. Friday, 5 September, will be a particularly important day, as data on average hourly earnings, average hourly wages, and, most importantly, non-farm employment change and the unemployment rate will be released. These reports are among the most influential on the value of the dollar, and any deviations from forecasts can cause significant market movements.

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