Market Summary by AFORTI: Increased tensions in the Middle East, rejection of tariffs by the US Supreme Court, weak macroeconomic data from Poland

Last week, weak macroeconomic data from Poland, including a decline in industrial production and wage growth, as well as increased tensions in the Middle East and the rejection of tariffs by the US Supreme Court, were key factors. European markets saw mixed PMI readings and a weakening of investor sentiment according to the ZEW index, with inflation stabilising in Germany and falling in France. In the coming week, investors' attention will focus on speeches by the presidents of the ECB and the Bank of England, as well as key inflation data for the Eurozone and the US, which will shape market expectations regarding future interest rate decisions.

Economic indicators

Poland

1. Employment growth (y/y) (January): -0.8%; forecast -0.7%; previous -0.7%;
2. Producer price index (PPI) (y/y) (January): -2.6%; forecast -2.3%; previous -2.5%;
3. Industrial production (y/y) (January): -1.5%; forecast 2.4%; previous 7.3%;
4. Corporate sector wages (y/y) (January): 6.1%; forecast 7.2%; previous 8.6%;

Eurozone

1. Industrial production (m/m) (December): -1.4%; forecast -1.5%; previous 0.3%;
2. Industrial production (y/y) (December): 1.2%; forecast 1.2%; previous 2.2%;
3. Consumer confidence index (February): -12.2; forecast -12.0; previous -12.4;
4. PMI index for industry (February): 50.8; forecast 49.9; previous 49.5;
5. PMI index for services (February): 51.8; forecast 51.9; previously 51.6;
6. ZEW economic sentiment index (February): 39.4; forecast 45.7; previously 40.8;

Germany

1. Inflation (CPI): m/m (January): 0.1%; forecast 0.1%; previous 0.0%;
2. Inflation (CPI): y/y (January): 2.1%; forecast 2.1%; previous 1.8%;
3. Harmonised Index of Consumer Prices (HICP) (m/m) (January): -0.1%; forecast -0.1%; previous 0.2%;
4. Harmonised Index of Consumer Prices (HICP) (y/y) (January): 2.1%; forecast 2.1%; previous 2.0%;
5. ZEW Index of Current Economic Conditions (February): -65.9; forecast -65.7; previous -72.7;
6. ZEW Economic Sentiment (February): 58.3; forecast 65.8; previous 59.6;

France

1. Inflation (CPI): m/m (January): -0.3%; forecast -0.3%; previous 0.1%;
2. Harmonised Index of Consumer Prices (HICP) (m/m) (January): -0.4%; forecast -0.4%; previous 0.1%;
3. Harmonised Index of Consumer Prices (HICP) (y/y) (January): 0.4%; forecast 0.4%; previously 0.7%;
4. PMI for services (February): 49.6; forecast 49.1; previously 48.4;
5. PMI index for industry (February): 49.9; forecast 50.9; previously 51.2;
6. Composite PMI index according to S&P Global (February): 49.9; forecast 49.7; previously 49.1;

United Kingdom

1. Unemployment rate (December): 5.2%; forecast 5.2%; previous 5.1%;
2. Jobless claims (January): 28.6K; forecast 22.8K; previous 2.7K;
3. Average earnings, excluding bonuses (December): 4.2%; forecast 4.6%; previously 4.6%;
4. Consumer price index (CPI): y/y (January): 3.0%; forecast 3.0%; previously 3.4%;
5. Inflation (CPI): m/m (January): -0.5%; forecast -0.5%; previous 0.4%;
6. Retail price index (RPI) (y/y) (January): 3.8%; forecast 3.8%; previous 4.2%;

USA

1. New home sales (December): 745K; forecast 732K; previous 656K;
2. Michigan consumer sentiment index (February): 56.6; forecast 57.3; previous 56.4;
3. Number of new unemployed: 206K; forecast 223K; previously 229K;
4. Index of signed home purchase agreements (m/m) (January): -0.8%; forecast 1.4%; previously -7.4%;
5. US Leading Index, m/m (December): -0.2%; forecast -0.2%; previous -0.3%;
6. New York Manufacturing Index (February): 7.10; forecast 6.40; previous 7.70;
7. Building permits (December): 1.455 million; forecast 1.448 million; previously 1.388 million;
8. Gross Domestic Product (GDP) (quarter-on-quarter) (Q4): 1.4%; forecast 2.8%; previously 4.4%;
9. PMI index for industry (February): 51.2; forecast 52.4; previously 52.4;
10. PMI index for services (February): 52.3; forecast 53.0; previously 52.7;

Currency market

This week, the euro (EUR) strengthened against the Polish zloty (PLN) by 0.19%. The euro price fluctuated between 4.2067 and 4.2264.  

Similarly, the US dollar (USD) strengthened against the Polish zloty (PLN) by 1.01%. The price of the dollar fluctuated between 3.5451 and 3.5983.  

Oil and gold market

The price of BRENT crude oil rose by 5.88%. The price fluctuated between 66.90 and 72.29 USD/barrel.  

Gold, on the other hand, rose by 1.31%. The price of gold fluctuated between 4,872.70 and 5,129.46 USD/ounce. 

Stock exchange

The WIG index rose by 0.43%. The price of the WIG index fluctuated between 122,999 and 126,178.  

Cryptocurrencies

The price of Bitcoin (BTC) fell by 2.79% and fluctuated between PLN 237,890 and PLN 255,885.  

Important events of the past week

The spectre of war in the Middle East: Tensions between the US and Iran have reached a critical point, with American officials estimating the likelihood of armed conflict in the coming weeks at nearly 90%. In response to the deployment of American aircraft carriers and dozens of fighter jets, Tehran has threatened retaliatory strikes and temporarily blocked shipping in the strategic Strait of Hormuz. The spectre of global supply paralysis has pushed WTI crude oil prices to levels not seen since last summer, prompting investors to flee to the dollar as a safe haven.

Supreme Court rejects Trump's tariffs: The US Supreme Court ruled by a 6-3 majority that the blanket tariffs imposed by Donald Trump under the IEEPA Act exceeded his authority and were unlawful. The ruling, welcomed by Wall Street, strikes at the heart of the administration's economic programme, removing a significant amount of trade uncertainty from the markets. President Trump described the court's decision as ‘outrageous’ and announced the immediate implementation of an alternative scenario, involving the introduction of a new 10 per cent tariff using other legal tools.

Split at the Munich Summit: This year's Munich Security Conference highlighted a deep crisis in transatlantic relations, pointing to an unprecedented distance between the new US administration and Europe. American delegates made it clear that the national interest of the United States takes precedence over the global order, which calls into question the existing security guarantees for the Old Continent. Faced with the ongoing erosion of the geopolitical order, European leaders declared the need to accelerate work on building the region's military and economic sovereignty.

Weak data from Poland and MPC rate cuts: January's Polish economic results clearly fell short of expectations, showing a 1.5% decline in industrial production and a deep, nearly 13% slump in the construction sector. The weaker economic situation is accompanied by a slowdown in wage growth to 6.1% and 31 months of deflation in industry (PPI at -2.5%). According to analysts, these data increase pressure on the Monetary Policy Council, and Marcin Zarzecki's declaration of a possible 25 basis point cut in March makes the resumption of the cycle of cuts a realistic scenario.

Orlen's spectacular financial results: The Orlen Group presented solid results for last year, generating nearly PLN 42 billion in EBITDA LIFO profit with record capital expenditure of PLN 32.6 billion. The 320% jump in net profit attracted the attention of investors, although it should be remembered that this growth was largely due to the base effect and last year's write-downs. Market optimism is supported by the growing share of foreign operations, which already generate over 35% of the company's revenues, strengthening its position as the leader of the energy sector in Central and Eastern Europe.

Events worth watching this week

Outlook for the zloty: Monday's retail sales data for January will be key for the zloty. Thursday's publication of the unemployment rate (forecast at 6.0%) will also have a significant impact on sentiment. These readings will allow concerns about an economic slowdown to be verified and will shape market expectations regarding further steps by the Monetary Policy Council on interest rates.

Outlook for the euro: The exchange rate of the single currency at the beginning of the week will be defined by the readings of the German Ifo index and the speech by ECB President Christine Lagarde scheduled for Monday. Increased volatility may occur on Wednesday, with the publication of CPI inflation data for the eurozone and the revision of German GDP. The week will close with key inflation readings from the bloc's largest economies, Germany and France, scheduled for Friday, 27 February.

Outlook for the dollar: For the dollar, investors will focus on Tuesday's Conference Board consumer confidence reading. As usual, Thursday's data on the number of new jobless claims will be an important item on the calendar. Friday's release of the producer price index (PPI) for January will be decisive for the short-term valuation of the US currency.

Outlook for the pound: The pound may react primarily to Tuesday's speech by Bank of England Governor Andrew Bailey and the CBI distribution trade survey published on the same day. At the end of the week, sentiment around the British currency will be shaped by Friday's GfK consumer confidence reading, which will show the health of UK households.

TREASURY DEPARTMENT

AFORTI.BIZ