Market Summary by AFORTI: Interest rate cuts in the UK and Japan, low inflation reading in the US, EU-Mercosur agreement blocked

Last week, the key events were the decisions of the central banks in the eurozone, the UK and Japan, and the blocking of the EU-Mercosur trade agreement. On the asset markets, the WIG index and gold recorded gains, while oil and Bitcoin lost value and the zloty strengthened against the euro and the dollar. In the coming week, investors will focus on retail sales data in Poland and the PCE inflation index in the US.

Economic indicators

Poland

1. CPI y/y (November): value: 2.5%; forecast: 2.4%; previous: 2.4%

2. CPI m/m (November): value: 0.1%; forecast: 0.1%; previous: 0.1%

3. Current account balance (October): value: 1924M; forecast: 130M; previous: -725M

4. Core CPI y/y (November): value: 2.7%; forecast: 2.7%; previous: 3.0%

5. Industrial production y/y (November): value: -1.1%; forecast: 2.7%; previous: 3.3%

6. PPI index y/y (November): value: -2.4%; forecast: -2.5%; previous: -2.2%

7. Employment growth y/y (November): value: -0.8%; forecast: -0.9%; previous: -0.8%

8. Corporate sector wages y/y (November): value: 7.1%; forecast: 6.2%; previous: 6.6%

Eurozone

1. Interest rate decision (December): actual: 2.15%; forecast: 2.15%; previous: 2.15%

2. Deposit rate (December): actual: 2.00%; forecast: 2.00%; previous: 2.00%

3. CPI y/y (November): actual: 2.1%; forecast: 2.2%; previous: 2.2%

4. Core CPI y/y (November): actual: 2.4%; forecast: 2.4%; previous: 2.4%

5. ECB marginal lending rate: value: 2.40%; previous: 2.40%

6. Current account balance n.s.a. (October): value: 32.0B; previous: 38.1B

Germany

1. PMI index for industry (December): value: 47.7; forecast: 48.6; previous: 48.2

2. PMI index for services (December): value: 52.6; forecast: 53.0; previous: 53.1

3. ZEW Economic Sentiment (December): value: 45.8; forecast: 38.4; previous: 38.5

4. ZEW Current Economic Conditions Index (December): value: -81.0; forecast: -80.0; previous: -78.7

5. Ifo Business Climate Index (December): value: 87.6; forecast: 88.2; previous: 88.0

6. Business Expectations (December): value: 89.7; forecast: 90.5; previous: 90.5

France

1. PMI index for industry (December): value: 50.6; forecast: 48.1; previous: 47.8

2. PMI index for services (December): value: 50.2; forecast: 51.1; previous: 51.4

3. Business climate (December): value: 102; forecast: 98; previous: 98

4. PPI m/m (November): value: 1.1%; previous: 0.0%

5. PPI y/y (November): value: -3.30%; previous: -0.80%

6. Auction of 12-month French government bonds (BTF): value: 2.146%; previous: 2.148%

United Kingdom

1. CPI y/y (November): value: 3.2%; forecast: 3.5%; previous: 3.6%

2. Interest rate decision (December): value: 3.75%; forecast: 3.75%; previous: 4.00%

3. Unemployment rate (October): actual: 5.1%; forecast: 5.1%; previous: 5.0%

4. Jobless claims (November): actual: 20.1K; forecast: 21.6K; previous: -3.9K

5. Retail sales y/y (November): value: 0.6%; forecast: 1.6%; previous: 0.6%

6. Core CPI y/y (November): value: 3.2%; forecast: 3.4%; previous: 3.4%

USA

1. Non-farm payrolls (November): actual: 64K; forecast: 50K; previous: -105K

2. Unemployment rate (November): actual: 4.6%; forecast: 4.5%; previous: 4.4%

3. CPI y/y (November): actual: 2.7%; forecast: 3.1%; previous: 3.0%

4. Core CPI y/y (November): actual: 2.6%; forecast: 3.0%; previous: 3.0%

5. Initial jobless claims: value: 224K; forecast: 224K; previous: 237K

6. Retail sales m/m (October): value: 0.0%; forecast: 0.1%; previous: 0.1%

7. Services PMI (December): value: 52.9; forecast: 54.0; previous: 54.1

8. Manufacturing PMI (December): value: 51.8; forecast: 52.0; previous: 52.2

9. University of Michigan Consumer Sentiment Index (December): value: 54.6; forecast: 55.0; previous: 51.0

10. Crude oil inventories: value: -1.274M; forecast: -2.400M; previous: -1.812M

China

1. Industrial production y/y (November): value: 4.8%; forecast: 5.0%; previous: 4.9%

2. Retail sales y/y (November): value: 1.3%; forecast: 3.0%; previous: 2.9%

3. Fixed asset investment y/y (November): actual: -2.6%; forecast: -2.4%; previous: -1.7%

4. Unemployment rate (November): actual: 5.1%; forecast: 5.1%; previous: 5.1%

5. Real estate prices y/y (November): value: -2.4%; previous: -2.2%

6. Foreign direct investment (November): value: -7.50%; previous: -10.30%

Currency market

This week, the euro (EUR) weakened against the Polish zloty (PLN) by 0.40%. The euro price fluctuated between 4.2009 and 4.2255. 

Similarly, the dollar (USD) weakened against the zloty (PLN) by 0.14%. The price of the dollar fluctuated between 3.5746 and 3.6028. 

Oil and gold market

The price of Brent crude oil fell by 1.11%. The price fluctuated between USD 58.79 and USD 61.46 per barrel.

Gold, on the other hand, rose by 0.91%. The price of gold fluctuated between USD 4,300.55 and USD 4,405.80 per ounce.

Stock exchange

The WIG index rose by 1.54%. The WIG index price fluctuated between PLN 113,304 and PLN 115,700.

Cryptocurrencies

The price of Bitcoin (BTC) fell by 2.62% and fluctuated between PLN 305,903 and PLN 325,730.

Important events of the past week

Interest rate decisions in the eurozone and the United Kingdom: The European Central Bank left interest rates unchanged (at 2.00%), while the Bank of England decided to cut them by 25 basis points to 3.75%. Despite the ECB raising its GDP growth forecasts, the market reacted neutrally to this decision, focusing its attention on data from the US. As a result, the euro weakened against the dollar, bringing the EUR/GBP exchange rate to around 1.17.

Low inflation reading in the US: CPI inflation in the US unexpectedly fell to 2.7%, which initially triggered a sharp sell-off of the US currency. In its initial reaction, the dollar lost 0.5 cents against the euro, and its exchange rate against the zloty fell by 1.8 groszy. However, this trend reversed the very next day, when the dollar fully recovered its lost value. Investors quickly returned to a cautious assessment of the data, linking the low reading to statistical distortions following the recent government shutdown, which undermined market confidence in the sustainability of the decline in inflation.

Blocking of the EU-Mercosur agreement: The finalisation of the EU-Mercosur trade agreement has been postponed until January 2026 due to opposition from Poland, France and Italy. This decision, forced by mass protests from farmers fearing an influx of cheap food, prevented Ursula von der Leyen from quickly signing the agreement. Giorgia Meloni joined the blocking minority, which ultimately sealed the fate of the negotiations at the current summit.

Approval of a loan for Ukraine: EU leaders agreed on a €90 billion loan for Ukraine, which formally constitutes debt incurred by member states. Due to Belgium's resistance and concerns about financial stability, the mechanism for the direct transfer of frozen Russian assets was abandoned. Poland will participate in the repayment of interest on this liability, which, despite Hungary's opposition to the package, was considered a necessary security cost.

Interest rate hike in Japan: The Bank of Japan raised interest rates to 0.75%, the highest level in three decades, in response to inflation remaining above target. The market interpreted this move as a sign of a series of increases, although the decision itself had already been largely discounted by investors. In its initial reaction, the yen paradoxically lost value against the dollar, and bond yields exceeded the 2% ceiling.

Events worth watching this week

Outlook for the zloty: Monday (22 December) and the publication of retail sales data will be key for the zloty. On Tuesday, the market's attention will focus on unemployment, which is forecast to rise to 5.7%. In the second half of the week, liquidity will fall dramatically due to the holidays, and political uncertainty related to the president's vetoes may continue to limit the currency's potential.

Outlook for the euro: The euro exchange rate will depend on Tuesday's (23 December) data from Germany, including import prices. On that day, reports on car registrations in Germany and France will illustrate the condition of the automotive sector. The currency also remains under pressure from the ECB's recent interest rate decision and the failure of the trade agreement with Mercosur.

Outlook for the dollar: On Monday (22 December), the dollar will react to the PCE index, the Fed's preferred measure of inflation. On Tuesday, investors will learn the final GDP for the third quarter and consumer sentiment. The pre-Christmas week will close on Wednesday with a package of data on durable goods orders and jobless claims.

Outlook for the pound: The pound will start the week on Monday (22 December) with the final GDP and balance of payments readings. These data will verify the state of the economy after the Bank of England's latest interest rate cut. The macroeconomic picture of the market will be complemented by Tuesday's reports on new car registrations.

On the occasion of the upcoming Christmas holidays, we wish you peace and respite from the daily challenges of the market. May the New Year 2026 bring stability, sound investment decisions and prosperity in your personal and professional life.

TREASURY DEPARTMENT

AFORTI.BIZ