Market Summary by AFORTI: Israel–Lebanon ceasefire, closure of the Strait of Hormuz, rising inflationary pressure

Last week, the markets were preoccupied with the fragile truce between Israel and Lebanon and the re-blockade of the Strait of Hormuz by Iranian forces in response to Donald Trump’s naval blockade. Sentiment was shaped by rising inflationary pressure in Poland and the Eurozone, as well as a historic bull run on the stock exchanges in the US and Warsaw. Gold and the record-high WIG index gained ground, whilst Brent crude fell sharply; the zloty strengthened against the euro and the dollar. In the coming week, investors’ attention will focus on Polish data on production and retail sales, Christine Lagarde’s speech, and a set of inflation indicators from the UK.

Economic indicators

Poland

1. Current account balance (EUR) (February): actual -990M; forecast 399M; previous 1053M;
2. CPI (y/y) (March): actual 3.0%; forecast 3.0%; previous 2.4%;
3. CPI (m/m) (March): actual 1.1%; forecast 1.0%; previous 0.0%;
4. Core CPI (y/y) (March): actual 2.7%; forecast 2.5%; previous 2.5%;

Eurozone

1. Industrial production (m/m) (February): actual 0.4%; forecast 0.3%; previous -0.8%;
2. Industrial production (y/y) (February): actual -0.6%; forecast -1.0%; previous -0.6%;
3. CPI (y/y) (March): actual 2.6%; forecast 2.5%; previous 1.9%;
4. Core CPI (y/y) (March): actual 2.3%; forecast 2.3%; previous 2.4%;
5. CPI (m/m) (March): actual 1.3%; forecast 1.2%; previous 0.6%;
6. Trade balance (February): actual 11.5B; forecast 11.7B; previous -1.0B;

Germany

1. Wholesale Price Index (WPI) in Germany (y/y) (March): actual 4.1%; previous 1.2%;
2. Wholesale Price Index (WPI) in Germany (m/m) (March): actual 2.7%; forecast 0.4%; previous 0.6%;

France

1. HICP in France (m/m) (March): actual 1.1%; forecast 1.1%; previous 0.7%;
2. HICP in France (y/y) (March): actual 2.0%; forecast 1.9%; previous 1.1%;
3. CPI in France (y/y) (March): actual 1.7%; forecast 1.7%; previous 0.9%;
4. CPI in France (m/m) (March): actual 1.0%; forecast 0.9%; previous 0.6%;
5. Inflation (y/y) (March): actual 1.70%; previous 0.90%;

United Kingdom

1. GDP (m/m) (February): actual 0.5%; forecast 0.1%; previous 0.1%;
2. Factory output (m/m) (February): actual -0.1%; forecast 0.3%; previous 0.2%;
3. GDP q/q (February): actual 0.5%; forecast 0.2%; previous 0.3%;
4. Trade balance (February): actual -18.79B; forecast -19.40B; previous -15.08B;
5. Industrial production (MoM) (February): actual 0.5%; forecast 0.3%; previous -0.1%;
6. BRC retail sales index (YoY) (March): actual 3.1%; forecast 0.9%; previous 0.7%;

USA

1. Existing home sales (March): actual 3.98M; forecast 4.07M; previous 4.13M;
2. Existing home sales (m/m) (March): actual -3.6%; previous 2.7%;
3. Weekly change in employment (ADP): actual 39.30K; previous 26.00K;
4. PPI (month-on-month) (March): actual 0.5%; forecast 1.1%; previous 0.5%;
5. PPI (y/y) (March): actual 4.0%; forecast 4.6%; previous 3.4%;
6. New York Manufacturing Index (April): actual 11.00; forecast 0.30; previous -0.20;
7. Initial jobless claims: actual 207K; forecast 213K; previous 218K;
8. Continuing jobless claims: actual 1818K; forecast 1810K; previous 1787K;
9. TIC net long-term transactions (February): actual 58.6B; forecast 36.6B; previous 2.4B;
10. Fed balance sheet: actual 6706B; previous 6694B;

China

1. Exports (y/y) (March): actual 2.5%; forecast 8.3%; previous 21.8%;
2. Import balance (y/y) (March): actual 27.8%; forecast 11.1%; previous 19.8%;
3. Trade balance (USD) (March): actual 51.13B; forecast 107.20B; previous 213.62B;
4. GDP (y/y) (Q1): actual 5.0%; forecast 4.8%; previous 4.5%;
5. Industrial production (y/y) (March): actual 5.7%; forecast 5.4%; previous 6.3%;
6. Unemployment rate in China (March): actual 5.4%; forecast 5.2%; previous 5.3%;

Currency market

This week, the euro (EUR) weakened against the zloty (PLN) by 0.47%. The euro traded between 4.2228 and 4.2458. 

Similarly, the dollar (USD) weakened against the zloty (PLN) by 0.84%. The dollar’s price fluctuated between 3.5678 and 3.6052.  

Oil and gold market

The price of Brent crude fell by as much as 2.93%. The price fluctuated between 86.42 and 103.62 USD per barrel.  

Gold, on the other hand, rose by 1.66%. The price of gold fluctuated between 4,671.15 and 4,902.66 USD per ounce.  

Stock Exchange

The WIG index rose by a further 2.97%, reaching new record highs. The WIG index fluctuated between 130,400 and 135,266. 

Important events of the past week

Euphoria following the ceasefire: The announcement of an unexpected ceasefire in the Middle East sparked euphoria on the financial markets. The decision to call a ceasefire and the announcement that the Strait of Hormuz would be reopened prompted investors to rush back into riskier assets. As a result, the Polish zloty and the euro strengthened significantly, whilst the US dollar fell sharply. At the same time, oil prices, which had previously fuelled concerns about the stability of the energy sector, plummeted. Despite the optimism in the currency market, however, the geopolitical situation remains exceptionally volatile.

Chaos in the Strait of Hormuz: The Strait of Hormuz, a strategic route for global oil trade, has become a hotbed of massive chaos. Following a brief lull, the Iranian military has once again blocked the passage of vessels, threatening attacks on approaching ships. This sudden escalation is a direct response to the naval blockade ordered by Donald Trump, aimed at cutting Tehran off from financial inflows. Iranian forces have already fired on several commercial vessels, paralysing the transport of raw materials and hitting global energy prices.

Inflationary pressure is mounting: The oil shock triggered by the armed conflict is having a significant impact on national and global macroeconomic readings. In Poland, March consumer price inflation (CPI) stood at 3.0% year-on-year, whilst core inflation unexpectedly rose to 2.7%. According to EU methodology (HICP), price growth in Poland accelerated to 3.2%. Similar cost pressures are evident in the Eurozone, where the HICP index jumped to 2.6%, driven primarily by a sharp rise in fuel and energy prices.

Stock market record highs: Despite the uncertainty caused by the war, a historic bull market has taken hold on global trading floors, supported by hopes for peace and excellent results from US banks. The S&P 500 index broke through the 7,000-point barrier for the first time in history, whilst the Nasdaq surpassed the 24,000-point mark. Investor optimism has also reached the Warsaw Stock Exchange – the WIG index set its sixth consecutive record, surpassing the 134,000-point mark, confirming the broad and dynamic nature of the bull market.

Events worth watching this week

Outlook for the zloty: In the coming week, the zloty’s performance will be shaped by data from the domestic economy. Reports on industrial production and wage and employment growth are scheduled for release on Tuesday, 21 April. On Thursday, 23 April, attention will turn to retail sales figures and M3 money supply. The week will conclude with Friday’s unemployment rate reading.

Outlook for the euro: The euro exchange rate will be influenced by Tuesday’s release of the German ZEW index and Wednesday’s speech by ECB President Christine Lagarde. Preliminary PMI figures for manufacturing and services from key economies in the region are due on Thursday. The week will conclude with Friday’s release of the German Ifo business climate index.

Outlook for the dollar: The dollar’s performance will be shaped by Tuesday’s retail sales data and Wednesday’s report on crude oil inventories. On Thursday, figures on new jobless claims and PMI indices will be released. Friday will see the publication of the University of Michigan’s consumer sentiment index and inflation forecasts.

Outlook for the pound: Tuesday’s labour market data, including the unemployment rate, will be crucial for the pound’s exchange rate. A wide range of inflation indicators (CPI and PPI) is scheduled for release on Wednesday. Further impetus will come from Thursday’s PMI readings and Friday’s reports on retail sales and GfK consumer sentiment.

TREASURY DEPARTMENT

AFORTI.BIZ