Market Summary by AFORTI: Escalation of the Israeli-Iranian conflict, central bank decisions, G7 summit

The past week in financial markets was characterised by the escalation of the Israeli-Iranian conflict , which translated into higher oil prices and a stronger dollar. Seven central banks announced their interest rate decisions, including the Fed, which kept rates unchanged. At the same time, the G7 summit took place, with no major agreements reached

Economic indicators

Poland

1. Core CPI (y/y) (May): 3.3%; forecast 3.2%; previously 3.4%

Eurozone

1. CPI (y/y) (May): 1.9%; forecast 1.9%; previously 2.2%

2. HICP index, excluding energy and food (y/y) (May): 2.4%; forecast 2.4%; previously 2.7%

3. Eurozone salaries (y/y) (Q1): 3.40%; previously 4.10%

4. ZEW Economic Sentiment in Germany (June): 47.5; forecast 34.8; previously 25.2

5. ZEW Index (June): 35.3; forecast 23.5; previously 11.6

6. construction output (m/m) (Apr): 1.65%; previously -0.19%

Germany

1. ZEW index of current economic conditions in Germany (June): -72.0; forecast -74.0; previous -82.0

2. Germany PPI (y/y) (May): -1.2%; forecast -1.2%; previously -0.9%

3. German PPI (m/m) (May): -0.2%; forecast -0.3%; previously -0.6%

France

1. Business climate in France (June): 96; forecast 97; previous 97

United Kingdom

1. Core CPI (y/y) (May): 3.5%; forecast 3.5%; previously 3.8%

2. CPI (y/y) (May): 3.4%; forecast 3.3%; previously 3.5%

3. Interest rate decision (June): 4.25%; forecast 4.25%; previously 4.25%

4. BoE MPC: number of votes to hold interest rates (June): 6; forecast 7; previously 2

5. Rightmove house price index (y/y) (June): 0.8%; previously 1.2%

6. Base retail sales (y/y) (May): -1.3%; forecast 1.8%; prior 5.2%

USA

1. Base retail sales (m/m) (May): -0.3%; forecast 0.2%; previous 0.0%

2. Retail sales (m/m) (May): -0.9%; forecast -0.5%; previous -0.1%

3. crude oil inventories: -11.473M; forecast -2.300M; previous -3.644M

4. USA leading index (m/m) (May): -0.1%; forecast -0.1%; previous -1.4%

5. New York manufacturing index (June): -16.00; forecast -5.90; previous -9.20

6. declared initial unemployed: 245K; forecast 246K; prior 250K

7. Philadelphia Fed index of prices paid (June): 41.40; prior 59.80

8. interest rate decision: 4.50%; forecast 4.50%; previously 4.50%

China

1. Fixed asset investment (y/y) (May): 3.7%; forecast 4.0%; previously 4.0%

2. Industrial production (y/y) (May): 5.8%; forecast 5.9%; previously 6.1%

3. China industrial production, cumulative (y/y) (May): 6.3%; forecast 4.9%; previously 6.4%

4. China unemployment rate (May): 5.0%; forecast 5.1%; previous 5.1%

5. PBoC key lending rate (June): 3.50%; forecast 3.50%; previously 3.50%

6. PBoC base lending rate: 3.00%; forecast 3.00%; previously 3.00%

Foreign exchange market

This week, the euro (EUR) has maintained its value against the zloty (PLN) since the beginning of the period. The euro price oscillated between 4.2581 and 4.2789.

On the other hand, the dollar (USD) weakened against the zloty (PLN) by 0.19% since the beginning of the period. The dollar price oscillated between 3.6915 and 3.7378. 

Oil and gold market

The price of BRENT crude oil increased by 3.76% since the beginning of the period. The price oscillated in a range of USD 70.82 - 78.82/barrel. 

The gold price, on the other hand, fell by 2.00% since the beginning of the period. The gold price oscillated in the range of USD 3357.12 - 3471.15/ounce.  

Stock Exchange

The WIG index recorded an increase of 1.05% since the beginning of the period. The value of the WIG index oscillated between 98 558 and 100 485. 

Cryptocurrencies

The price of Bitcoin (BTC) fell by 4.58% since the beginning of the period. The price of Bitcoin oscillated in the range of 350,566.00 - 395,000.00.

Important events of the past week

Escalation of the Israel-Iran conflict: The past week saw an escalation of the conflict in the Middle East, which triggered significant reactions in financial markets and affected international monetary policy.

On the night of 12-13 June, Israel launched a military strike against Iran, to which Iran responded with rocket fire and drone attacks. The US joined Israel in attacking Iran and announcing the destruction of Iran's nuclear programme and military bases, using advanced warfare. The USA is mobilising troops in the Middle East, sending warships, aircraft carriers, support planes and fighter jets, while raising the level of protective readiness. Despite the commitment, President Trump has stated that he will wait two weeks before making a final decision on the USA's active participation in the conflict.

Iran is considering blocking the Strait of Hormuz, a key route for some 20 million barrels of oil per day and 20 per cent of global LNG trade. However, experts estimate that closing the strait would be ‘suicidal’ for the Iranian economy and would also directly hit the interests of China, the largest importer of Iranian oil. Beijing supports Iran by trading oil outside the Western banking system, settling in yuan and pledging to invest $400 billion in Iranian infrastructure. The escalation of the Middle East conflict has strengthened the US dollar, causing stock prices to fall and oil prices to fluctuate. Interestingly, the news of the postponement of the USA's decision weakened the dollar and boosted stock prices.

Central bank decisions: In the past week, seven central banks announced their interest rate decisions. Among them, the Fed, which unanimously kept rates in the 4.25-4.50% range, lowering the USA GDP growth forecast and raising the inflation forecast. The Swiss National Bank, the Swedish Riksbank and the Central Bank of Norway unexpectedly cut their interest rates, with the SNB returning to zero. The decisions were largely in line with market expectations, although the Norwegian cut came as a surprise. The Bank of England, the People's Bank of China and the Central Bank of Turkey kept rates unchanged, although in the UK some members voted for a cut and in Turkey a cut in the overnight lending rate was expected.

G7 summit: The G7 summit, bringing together the world's largest economies and democracies, took place this week in the Canadian resort of Canada Skis. Despite expectations, no major agreements were reached at the summit, as politicians could not reach an agreement. In addition, Donald Trump left the summit early due to the situation in the Middle East. President Trump surprised by saying that Russia's exclusion from the group in 2014 was a mistake and expressing openness to China's inclusion in the G7. The German press commented that the summit showed a picture of a West in disarray, without a clear leader capable of coordinating action in the face of global challenges.

Events worth watching this week

Middle East conflict: Tensions between Israel and Iran and USA involvement will remain in the spotlight. Any new reports, political statements or military action in the region will be closely watched, influencing global risk aversion and demand for safe-haven currencies (USD, JPY, CHF). Keep in mind President Trump's announcement of a decision on the USA's possible involvement in the conflict, which is expected within two weeks.

Macroeconomic data from Poland: In the coming days, from Monday 23 to Wednesday 25 June, the Polish zloty will be subject to particular attention due to a series of important macroeconomic publications. The market will carefully analyse Monday's readings on wages and employment in the corporate sector, as well as industrial production and producer inflation for May. This will be followed on Tuesday by May's retail turnover and M3 money supply data, while Wednesday will see information on the development of the unemployment rate. Readings exceeding market expectations may favour the appreciation of the Polish currency, signalling good economic health, while disappointing data may trigger depreciation pressure on the zloty.

TREASURY DEPARTMENT

AFORTI.BIZ