Market Summary by AFORTI: Suspension of USA–Iran talks, US interest rates held steady, pressure on the zloty to weaken, inflation in the Eurozone

Last week, the markets were dominated by reports of interest rates being held steady in the USA, the suspension of negotiations on the Iran deal, and the highest inflation in the Eurozone for months. The domestic WIG index recorded a slight rise, whilst Brent crude oil and gold prices fell sharply. The Polish zloty weakened against both the euro and the US dollar. In the coming week, investors’ attention will focus on preliminary PMI readings, US GDP and PCE inflation data, as well as domestic labour market and retail sales reports.

Economic indicators

Poland

• CPI (y/y) (May): actual 3.1%; forecast 3.1%; previous 3.2%;
• CPI (m/m) (May): actual -0.3%; forecast -0.3%; previous 0.6%;
• Core CPI (y/y) (May): actual 3.1%; forecast 3.1%; previous 3.0%;
• Industrial production (y/y) (May): actual 4.1%; forecast 2.5%; previous 2.9%;

Eurozone

• Trade balance (April): actual -1.0B; forecast 7.8B; previous 4.9B;
• Eurozone wages (y/y) (Q1): actual 3.40%; no forecast; previous 3.00%;
• ZEW Index (June): actual 9.5; forecast -7.2; previous -9.1;
• CPI (year-on-year) (May): actual 3.2%; forecast 3.2%; previous 3.0%;
• Core CPI (y/y) (May): actual 2.6%; forecast 2.5%; previous 2.2%;
• CPI (m/m) (May): actual 0.1%; forecast 0.1%; previous 1.0%;

Germany

• ZEW Index of Current Economic Conditions in Germany (June): actual -61.0; forecast -77.5; previous -77.8;
• ZEW Economic Sentiment in Germany (June): actual 10.5; forecast -5.8; previous -10.2;
• PPI in Germany (m/m) (May): actual 0.3%; forecast 0.7%; previous 1.2%;
• Wholesale Price Index (WPI) in Germany (y/y) (May): actual 5.9%; forecast not available; previous 6.3%;
• Wholesale Price Index (WPI) in Germany (m/m) (May): actual -0.6%; forecast 0.6%; previous 2.0%;

France

• Auction of 12-month French government bonds (BTF): actual 2.802%; no forecast; previous 2.887%;
• Auction of 3-month French government bonds (BTF): actual 2.352%; forecast not available; previous 2.363%;
• Auction of 6-month French government bonds (BTF): actual 2.465%; forecast not available; previous 2.507%;

United Kingdom

• CPI (y/y) (May): actual 2.8%; forecast 3.0%; previous 2.8%;
• Producer Price Index (PPI Output) (y/y) (May): actual 4.0%; forecast 4.0%; previous 4.1%;
• Producer Price Index (PPI Input) (y/y) (May): actual 8.7%; forecast 8.8%; previous 7.9%;
• Unemployment rate (April): actual 4.9%; forecast 5.0%; previous 5.0%;
• Claims for unemployment benefit (May): actual 31.2K; forecast 25.6K; previous 8.3K;
• Interest rate decision (June): actual 3.75%; forecast 3.75%; previous 3.75%;

USA

• New York Manufacturing Index (June): actual 5.70; forecast 13.20; previous 19.60;
• Industrial production (y/y) (May): actual 1.87%; no forecast; previous 1.37%;
• Housing starts (May): actual 1.177M; forecast 1.430M; previous 1.392M;
• Building permits (May): actual 1.413M; forecast 1.420M; previous 1.423M;
• Retail sales (month-on-month) (May): actual 0.9%; forecast 0.5%; previous 0.4%;
• Core retail sales (month-on-month) (May): actual 0.8%; forecast 0.8%; previous 0.7%;
• Crude oil stocks: actual -8.263M; forecast -3.600M; previous -7.227M;
• Interest rate decision: actual 3.75%; forecast 3.75%; previous 3.75%;
• Initial jobless claims: actual 228K; forecast 225K; previous 230K;
• Claims for unemployment benefit: actual 1810K; forecast 1800K; previous 1788K;

China

• Industrial production (y/y) (May): actual 4.5%; forecast 4.4%; previous 4.1%;
• Unemployment rate in China (May): actual 5.1%; forecast 5.2%; previous 5.2%;
• Fixed asset investment (y/y) (May): actual -4.1%; forecast -2.3%; previous -1.6%;
• Retail sales (y/y) (May): actual -0.6%; forecast -0.3%; previous 0.2%;
• Property prices (year-on-year) (May): actual -3.5%; forecast: none; previous: -3.5%;
• Industrial production in China, cumulative (year-on-year) (May): actual 5.4%; forecast: none; previous: 5.8%;

Currency market

This week, the euro (EUR) strengthened against the zloty (PLN) by 0.41%. The euro traded within the range of 4.2319 – 4.2671. 

Similarly, the US dollar (USD) strengthened against the Polish zloty (PLN) by 1.48%. The dollar’s price fluctuated between 3.6465 and 3.7366.  

Oil and gold markets

The price of Brent crude fell by 7.33 per cent. The price fluctuated between 76.72 and 84.44 USD per barrel.  

Similarly, the price of gold fell by 1.58 per cent. The price of gold fluctuated between 4,141.67 and 4,399.65 USD per ounce.  

Stock Exchange

The WIG index rose by 0.09%. The WIG index fluctuated between 137,510 and 141,210. 

Key events from the past week

The USA–Iran agreement and the suspension of talks: Donald Trump announced a preliminary memorandum with Iran aimed at reopening the Strait of Hormuz. Despite initial market optimism, differences soon emerged regarding Iran’s nuclear programme and financial demands amounting to US$300 billion. As a result, formal implementation negotiations in Switzerland, attended by Vice-President J.D. Vance, were suspended. This decision effectively dampened investor sentiment.

US interest rates held steady: In line with market consensus, the Fed kept interest rates in the 3.50–3.75% range. The new chairman, Kevin Warsh, surprised the markets by removing forward guidance from the statement, emphasising the risks of supply shocks and higher inflation. The hawkish tone of the statement increased the likelihood of a further rate rise later this year, leading to a significant strengthening of the dollar.

Interest rate decisions by the Bank of Japan, the Bank of England and the Swiss National Bank: The Bank of Japan implemented a historic interest rate hike to 1.0 per cent – a level not seen for 31 years. Despite this, the yen remained weak due to the continuation of accommodative financial conditions. In Europe, the status quo prevailed: the Bank of England kept its main rate at 3.75%, whilst the Swiss National Bank (SNB) left it at a neutral level of 0.00%.

Falls in the bond market and pressure on the zloty: The Fed’s hawkish message exerted strong pressure on emerging market currencies, leading to a weakening of the zloty. The EUR/PLN exchange rate rose to 4.26, whilst the USD/PLN returned to the 3.72–3.73 range. At the same time, a sell-off was observed in the domestic debt market – yields on government securities rose by 4–5 basis points across the entire yield curve.

Inflation in the Eurozone: May’s HICP inflation in the Eurozone stood at 3.2% year-on-year, reaching its highest level since September 2023. Persistent price pressures are significantly limiting the European Central Bank’s room for manoeuvre regarding interest rate cuts. It is worth noting that the inflation rate in Poland is now on a par with the aforementioned EU average.

Events worth watching this week

Outlook for the zloty: Monday’s (22 June) readings on retail sales, the PPI and wage growth will have a key impact on the Polish zloty’s valuation. On Tuesday (23 June), the market will analyse M3 money supply data, whilst on Wednesday (24 June), Poland’s May unemployment rate will be published.

Outlook for the euro: The euro may react to Monday’s (22 June) speech by ECB President Christine Lagarde. Tuesday’s (23 June) preliminary PMI readings for manufacturing and services will be key for the single currency. On Wednesday (24 June), meanwhile, market attention will focus on the release of the German Ifo business climate index.

Outlook for the dollar: The dollar’s exchange rate will be shaped by Tuesday’s (23 June) preliminary PMI readings. However, Thursday’s (25 June) release of GDP growth figures, the key PCE index and labour market data will be of paramount importance for the US currency. The week’s macroeconomic calendar will conclude on Friday (26 June) with the University of Michigan’s consumer sentiment figures.

Outlook for the pound: The British pound’s exchange rate will be influenced by Tuesday’s (23 June) preliminary PMI figures for manufacturing and services. On Thursday (25 June), the market will assess the results of the CBI’s retail trade survey. Given the relatively light macroeconomic calendar for the UK this week, the currency’s valuation will depend largely on global market sentiment.

TREASURY DEPARTMENT

AFORTI.BIZ