Market Summary by AFORTI: Interest rates held steady, LNG market paralysed, drastic rises in energy prices

Last week, the key developments were the ECB and the Fed keeping interest rates on hold, the paralysis of the global LNG market following the destruction of infrastructure in Qatar, and the sharp rises in energy prices triggered by the escalation of the conflict in the Middle East. In the asset markets, the price of Brent crude rose, whilst gold, Bitcoin and the WIG index fell; at the same time, the zloty weakened slightly against the euro but strengthened against the dollar. In the coming week, investors’ attention will focus on preliminary PMI readings from the major economies, UK inflation data and domestic macroeconomic indicators, which will shape market volatility in the face of the risk of energy shocks.

Economic indicators

Poland

1. Core CPI (y/y) (February): actual 2.5%; forecast 2.5%; previous 2.7%;
2. Current account balance (EUR) (January): actual 1,153M; forecast -300M; previous -1,698M;
3. Industrial production (y/y) (February): actual 1.5%; forecast 1.3%; previous -1.5%;
4. Employment growth (y/y) (February): actual -0.8%; forecast -0.8%; previous -0.8%;
5. PPI (y/y) (February): actual -2.3%; forecast -2.4%; previous -2.6%;
6. Corporate sector wages (y/y) (February): actual 6.1%; forecast 6.6%; previous 6.1%;

Eurozone

1. ZEW Index (March): actual -8.5; forecast 26.5; previous 39.4;
2. CPI (y/y) (February): actual 1.9%; forecast 1.9%; previous 1.7%;
3. Deposit rate (March): actual 2.00%; forecast 2.00%; previous 2.00%;
4. Interest rate decision (March): actual 2.15%; forecast 2.15%; previous 2.15%;
5. Current account (January): actual 37.9B; forecast 17.2B; previous 14.6B;
6. Trade balance (January): actual -1.9B; forecast 12.8B; previous 11.2B;

Germany

1. ZEW Current Economic Conditions Index in Germany (March): actual -62.9; forecast -67.1; previous -65.9;
2. ZEW Economic Sentiment in Germany (March): actual -0.5; forecast 39.0; previous 58.3;
3. German PPI (m/m) (February): actual -0.5%; forecast 0.3%; previous -0.6%;
4. Auction of 12-month German government bonds (Bubill): yield 2.270%; previous 1.985%;
5. Auction of 6-month German government bonds (Bubill): actual 2.121%; previous 1.986%;
6. German PPI (y/y) (February): actual -3.3%; forecast -2.7%; previous -3.0%;

France

1. Auction of 12-month French government bonds (BTF): yield 2.353%; previously 2.339%;
2. Auction of 3-month French government bonds (BTF): yield 2.108%; previously 2.097%;
3. Auction of 6-month French government bonds (BTF): actual 2.199%; previous 2.217%;

United Kingdom

1. Unemployment rate (January): actual 5.2%; forecast 5.3%; previous 5.2%;
2. Employment change 3m/3m (m/m) (January): actual 84K; forecast -4K; previous 52K;
3. Average earnings, including bonuses (January): actual 3.9%; forecast 3.9%; previous 4.2%;
4. Jobless claims (February): actual 24.7K; forecast 25.8K; previous 4.7K;
5. Interest rate decision (March): actual 3.75%; forecast 3.75%; previous 3.75%;
6. Net public sector borrowing: actual 14.30B; forecast 8.70B; previous -31.90B;

USA

1. New York Manufacturing Index (March): actual -0.20; forecast 4.00; previous 7.10;
2. Industrial production (y/y) (February): actual 1.44%; previous 2.33%;
3. NAHB Housing Market Index (March): actual 38; forecast 37; previous 37;
4. ADP weekly employment change: actual 9.00K; previous 15.50K;
5. Pending home sales index (mo/mo) (February): actual 1.8%; forecast -0.6%; previous -1.0%;
6. Crude oil inventories: actual 6.156M; forecast -1.500M; previous 3.824M;
7. Interest rate decision: actual 3.75%; forecast 3.75%; previous 3.75%;
8. Building permits (January): actual 1.386M; forecast 1.376M; previous 1.455M;
9. Initial jobless claims: actual 205K; forecast 215K; previous 213K;
10. New home sales (January): actual 587K; forecast 722K; previous 712K;

China

1. China’s industrial production, cumulative (y/y) (February): actual 6.3%; forecast 5.3%; previous 5.9%;
2. Unemployment rate in China (February): actual 5.3%; forecast 5.1%; previous 5.1%;
3. Fixed asset investment (y/y) (February): actual 1.8%; forecast -5.0%; previous -3.8%;
4. Retail sales (y/y) (February): actual 2.8%; forecast 2.6%; previous 0.9%;
5. PBoC benchmark lending rate (March): actual 3.50%; forecast 3.50%; previous 3.50%;
6. Property prices (y/y) (February): actual -3.2%; previous -3.1%;

Currency market

This week, the euro (EUR) strengthened against the zloty (PLN) by 0.13%. The euro traded between 4.2564 and 4.2868. 

In contrast, the dollar (USD) weakened against the zloty (PLN) by 1.41%. The dollar’s price fluctuated between 3.6728 and 3.7420.  

Oil and gold market

The price of Brent crude rose by 4.19%. The price fluctuated between 99.81 and 118.14 USD per barrel.  

Gold, however, fell by 9.62%. The price of gold fluctuated between 4,486.49 and 5,045.30 USD per ounce.  

Stock Exchange

The WIG index fell by 0.95%. The WIG index fluctuated between 118,709 and 125,139.

Cryptocurrencies

The price of Bitcoin (BTC) fell by 2.13% and fluctuated between PLN 250,000 and PLN 281,606.

Key events from the past week

ECB and Fed interest rates held steady: The US Federal Reserve and the European Central Bank kept interest rates at their current levels (3.50–3.75% and 2.00% respectively). Both institutions significantly raised their long-term inflation forecasts, effectively dampening market hopes for a swift easing of monetary policy. The reason for this hawkish rhetoric is the growing risk of a sharp rise in energy prices, a direct consequence of the military escalation in the Middle East.

Paralysis of the global LNG market: Last week, the conflict escalated following an Israeli attack on Iran’s South Pars gas field, to which Tehran responded with a ballistic strike on the Ras Laffan complex in Qatar. As a result, 17% of Qatar’s LNG infrastructure was destroyed, immediately cutting the world off from 20% of the global supply of liquefied gas. According to forecasts by QatarEnergy, restoring this strategic facility to full production capacity could take between 3 and even 5 years.

Drastic rises in energy prices: The destruction of strategic infrastructure caused panic among investors: the price of European gas rose by nearly 30%, and Brent crude exceeded the $110 per barrel mark. The spectre of prolonged shortages has forced governments to implement stringent austerity measures. Slovakia has introduced refuelling limits and higher fuel prices for foreigners, whilst Asian countries have begun drastically restricting access to petrol and shortening the working week.

Capital flight to Switzerland: Missile strikes off the coast of the UAE have shattered Dubai’s image as a safe haven, causing panic among the wealthiest investors. Leading banks and financial institutions are urgently evacuating staff and scaling back operations in the region. Switzerland has emerged as the main beneficiary of this crisis, with capital inflows from the Middle East surging by nearly 40%.

Events worth watching this week

Outlook for the zloty: The Polish zloty may experience heightened volatility in the coming days. This is a direct result of the ongoing conflict in Iran, which is driving up oil prices and fuelling global inflationary pressure. On the domestic market, the key releases scheduled for Monday (23 March) will be retail sales data and M3 money supply figures. On Tuesday (24 March), investors will see the latest unemployment rate figures for Poland.

Outlook for the euro: The single currency remains extremely sensitive to the risk of energy shocks triggered by the war, a factor reflected in the ECB’s revised inflation forecasts. On the macroeconomic calendar, attention will focus on the preliminary PMI figures from Germany, France and the Eurozone (Tuesday, 24 March). Also significant for the euro’s valuation will be: Christine Lagarde’s speech and the Ifo index (Wednesday, 25 March), as well as the GfK consumer climate reading (Thursday, 26 March).

Outlook for the dollar: The US dollar is steadily strengthening its position as a ‘safe haven’ in the face of the military escalation in the Middle East. Key reference points for investors will be Tuesday’s PMI readings (24 March) and Thursday’s report on jobless claims (26 March). The week will conclude with the significant release of the University of Michigan report (Friday, 27 March), covering consumer sentiment and five-year inflation expectations.

Outlook for the pound: The British pound is currently vulnerable to sharp fluctuations stemming from market panic over tight oil supplies, which are hitting European economies. Pound traders will focus first on the PMI figures (Tuesday, 24 March), followed by key CPI and PPI inflation data (Wednesday, 25 March). The picture will be completed by Friday’s releases (27 March) on the GfK consumer confidence index and February retail sales.

TREASURY DEPARTMENT

AFORTI.BIZ