Market Summary by AFORTI: Trump extends ultimatum to Iran, Tehran threatens to block straits, government fuel package

Last week, the key developments were the extension of the US ultimatum to Iran, Tehran’s threats to block strategic straits, drone attacks paralysing Russian oil exports, and the Polish government’s introduction of a fuel subsidy package in response to rising prices. In the asset markets, the price of Brent crude, gold and Bitcoin fell, whilst the WIG index rose; at the same time, the zloty weakened against both the euro and the US dollar. In the coming week, investors’ attention will focus on the domestic manufacturing PMI, inflation estimates and the Eurozone PMI, US labour market data, and UK GDP figures, which will shape market volatility amid prolonged geopolitical uncertainty.

Economic indicators

Poland

1. Retail sales (y/y) (Feb): actual 4.3%; forecast 6.1%; previous 3.9%;
2. M3 money supply (y/y) (Mar): actual 10.6%; forecast 10.0%; previous 10.0%;
3. Car registrations (y/y) (Feb): actual 6.00%; previous -9.00%;
4. Car registrations (m/m) (Feb): actual 17.80%; previous -40.60%;
5. Unemployment rate (Feb): actual 6.1%; forecast 6.1%; previous 6.0%;

Eurozone

1. Consumer confidence index (Mar) P: actual -16.3; forecast -15.0; previous -12.3;
2. Manufacturing PMI (Mar) Actual: 51.4; forecast 49.4; previous 50.8;
3. Services PMI (Mar) Actual: 50.1; forecast 51.1; previous 51.9;
4. S&P Global Composite PMI (Mar) Actual: 50.5; forecast: 51.0; previous: 51.9;
5. M3 money supply (y/y) (Feb): 3.0%; forecast: 3.3%; previous: 3.3%;
6. Private loans (y/y) (Feb): actual 3.0%; forecast 3.1%; previous 3.0%;

Germany

1. Germany Manufacturing PMI (Mar) Actual: 51.7; forecast 49.6; previous 50.9;
2. Germany Services PMI (Mar) Actual: 51.2; forecast: 52.5; previous: 53.5;
3. Germany Composite PMI (Mar) Actual: 51.9; forecast: 51.8; previous: 53.2;
4. Business expectations in Germany (Mar): actual 86.0; forecast 86.0; previous 90.2;
5. Current assessment of the situation in Germany (Mar): actual 86.7; forecast 86.0; previous 86.7;
6. Ifo Business Climate Index in Germany (Mar): actual 86.4; forecast 86.2; previous 88.4;

France

1. PMI for manufacturing in France (Mar) P: actual 50.2; forecast 49.4; previous 50.1;
2. France Services PMI (Mar) Actual: 48.3; forecast: 49.2; previous: 49.6;
3. S&P Global Composite PMI for France (Mar) Actual: 48.3; previous: 49.9;
4. Business climate in France (Mar): actual 99; forecast 100; previous 102;
5. Consumer confidence index in France (Mar): actual 89; forecast 89; previous 91;
6. Total number of unemployed in France: actual 3,108.2K; previous 3,090.5K;

United Kingdom

1. Services PMI (Mar) Actual: 51.2; forecast 52.8; previous 53.9;
2. Composite PMI (Mar) P: actual 51.0; forecast 52.8; previous 53.7;
3. Manufacturing PMI (Mar) P: actual 51.4; forecast 50.0; previous 51.7;
4. CPI (y/y) (Feb): actual 3.0%; forecast 3.0%; previous 3.0%;
5. CPI (m/m) (Feb): actual 0.4%; forecast 0.4%; previous -0.5%;
6. Retail Price Index (RPI) (y/y) (Feb): actual 3.6%; forecast 3.7%; previous 3.8%;

USA

1. Atlanta Fed GDPNow Model (Q1) P: actual 2.0%; forecast 2.3%; previous 2.3%;
2. ADP weekly employment change: actual 10,000; previous 9,000;
3. Unit labour costs (mo/mo) (Q4): actual 4.4%; forecast 2.8%; previous 1.0%;
4. Non-farm productivity (mo/mo) (Q4): actual 1.8%; forecast 2.8%; previous 4.9%;
5. Manufacturing PMI (Mar) Actual: 52.4; forecast 51.5; previous 51.6;
6. Services PMI (Mar) P: actual 51.1; forecast 52.0; previous 51.7;
7. S&P Global Composite PMI (Mar) P: actual 51.4; previous 51.9;
8. API weekly crude oil inventory report: actual 2.300M; forecast -1.300M; previous 6.600M;
9. Current account (Q4): actual -190.7B; forecast -211.0B; previous -239.1B;
10. Crude oil inventories: actual 6.926M; forecast -1.300M; previous 6.156M;

China

1. Industrial profit in China, YTD (Feb): actual 15.2%; previous 0.6%;

Currency market

This week, the euro (EUR) strengthened against the zloty (PLN) by 0.31%. The euro traded in the range of 4.2514 – 4.2988.

Similarly, the dollar (USD) strengthened against the zloty (PLN) by 0.76%. The dollar’s price fluctuated between 3.6561 and 3.7345.

Oil and gold market

The price of Brent crude fell by 1.21%. The price fluctuated between 93.37 and 109.61 USD per barrel.

Similarly, gold fell by 1.11%. The price of gold fluctuated between 4,139.74 and 4,631.97 USD/ounce.

Stock Exchange

The WIG index rose by 0.36%. The WIG index fluctuated between 115,306 and 121,458.

Cryptocurrencies

The price of Bitcoin (BTC) fell by 4.20% and fluctuated between PLN 247,347 and PLN 264,900.

Key events from the past week

Trump extends ultimatum to Iran: US President Donald Trump has decided to extend the ultimatum issued to Iran by ten days (giving it until 6 April) and to postpone any potential large-scale attacks on the country’s energy infrastructure. This unexpected move significantly delays the prospect of a swift stabilisation of hydrocarbon supplies from the Persian Gulf region. The continuing market uncertainty is fuelling risk aversion among investors, which in turn is strongly supporting the US dollar, currently viewed as a safe haven.

Tehran threatens to block the straits: In response to threats from the United States, Tehran has announced that, in the event of an American attack, it will completely close the Strait of Hormuz and block the strategic Bab al-Mandab Strait, which connects the Red Sea with the Arabian Sea. Furthermore, Iran has threatened massive strikes on desalination plants in the Persian Gulf. The realisation of this scenario could trigger a massive humanitarian crisis – cutting off water supplies to as many as 100 million people would force the evacuation of entire countries, such as Qatar.

US energy blackmail of Europe: During negotiations on the trade agreement, the US ambassador to the European Union openly resorted to energy blackmail against the Old Continent. The Washington representative warned that if the European Parliament attempted to introduce its own amendments to the agreement – such as a sunset clause until 2028 or safeguards against new tariffs – supplies of American LNG would be jeopardised. This poses a serious challenge for Europe, which has only recently become independent of Russia and now faces the spectre of further shortages of the commodity.

Paralysis of Russian oil exports: In the shadow of the Middle East conflict, Ukrainian forces carried out massive and highly precise drone strikes on key Russian oil infrastructure. The strikes targeted, among others, Novatek’s Baltic complex in the port of Ust-Luga, the largest transhipment terminal in Primorsk, and the refinery in Saratov. The result of these successful operations is serious damage to the facilities and the temporary paralysis of around 40 per cent of Russia’s total capacity to export oil to global markets.

New government fuel package: In the face of rapidly rising fuel prices, the Polish government has adopted a special ‘CPN’ support package designed to protect household budgets. The plan involves a temporary reduction in VAT from 23% to 8%, a cut in excise duty to the EU minimum, and the introduction of a maximum retail price at petrol stations. These measures are intended to reduce refuelling costs by over one zloty per litre, but will cost the state budget around 1.6 billion zlotys a month.

Events worth watching this week

Outlook for the zloty: The zloty may experience significant volatility in the face of the protracted conflict in Iran, which is driving up oil prices and increasing inflationary risks. On the macroeconomic calendar, the key event for the Polish currency will be the publication of the domestic manufacturing PMI, scheduled for Wednesday, 1 April.

Outlook for the euro: The single currency remains under immense downward pressure, triggered by the situation in Iran and the spectre of a massive energy shock on the Old Continent. Investors’ attention will be drawn to Tuesday’s (31 March) estimates of the CPI inflation rate for the Eurozone and Wednesday’s (1 April) PMI readings. Additionally, on Thursday, 2 April, the European Central Bank’s economic bulletin will be released.

Outlook for the dollar: The US currency continues to strengthen, acting as a safe haven in the shadow of the US’s extended ultimatum to Iran and growing risk aversion in the markets. Key for investors will be the ISM manufacturing index readings (Wednesday, 1 April) and unemployment figures (Thursday, 2 April). The week will conclude with a significant US labour market report, scheduled for Friday, 3 April.

Outlook for the pound: The British pound is highly vulnerable to sharp fluctuations and capital flight, driven by growing concerns over a disruption to Middle Eastern oil supplies. The UK macroeconomic calendar will open with key GDP growth data, due to be published on Tuesday, 31 March. On Wednesday, 1 April, markets will react to the latest UK manufacturing PMI readings.

TREASURY DEPARTMENT

AFORTI.BIZ