Last week, the key events were the US taking temporary control of Venezuela, the approval of the EU trade agreement with Mercosur, and dovish signals from the Monetary Policy Council. On the asset markets, the WIG index and Bitcoin recorded gains, as did oil and gold; at the same time, the zloty weakened against both the euro and the dollar. In the coming week, investors' attention will focus on the decision on interest rates in Poland, the US CPI inflation reading and the publication of the minutes of the ECB meeting.

Economic indicators

Poland

1. Foreign exchange reserves (EUR) (December): value 231.02B; previously 229.07B;

Eurozone

1. Retail sales (y/y) (November): value 2.3%; forecast 1.6%; previously 1.9%;

2. Unemployment rate (November): value 6.3%; forecast 6.4%; previous 6.4%;

3. PPI (y/y) (November): value -1.7%; forecast -1.9%; previous -0.5%;

4. Consumer confidence index (December): value -13.1; forecast -14.6; previous -12.8;

5. Economic sentiment index (December): value 96.7; forecast 97.0; previous 97.1;

6. HICP index excluding energy and food (m/m) (December): value 0.2%; previously -0.4%;

Germany

1. CPI index (y/y) (December): value 1.8%; forecast 2.0%; previously 2.3%;

2. CPI (m/m) (December): value 0.0%; forecast 0.3%; previously -0.2%;

3. Change in unemployment (December): value 3K; forecast 5K; previously 1K;

4. Unemployment rate (December): actual 6.3%; forecast 6.3%; previous 6.3%;

5. Factory orders (m/m) (November): actual 5.6%; forecast -0.9%; previous 1.6%;

6. Industrial production (m/m) (November): value 0.8%; forecast -0.6%; previous 2.0%;

France

1. CPI (y/y) (December): value 0.8%; forecast 0.9%; previous 0.9%;

2. HICP (y/y) (December): value 0.7%; forecast 0.8%; previous 0.8%;

3. Industrial production (m/m) (November): value -0.1%; forecast -0.2%; previous 0.2%;

4. Consumer spending (m/m) (November): actual -0.3%; forecast -0.1%; previous 0.5%;

United Kingdom

1. Services PMI (December): actual 51.4; forecast 52.1; previous 51.3;

2. Composite PMI (December): value 51.4; forecast 52.1; previously 51.2;

3. Approved mortgage applications (November): value 64.53K; forecast 64.00K; previously 65.01K;

4. Halifax house price index (m/m) (December): value -0.6%; forecast 0.1%; previous -0.1%;

5. M4 money supply (m/m) (November): value 0.8%; forecast -0.1%; previous -0.2%;

USA

1. ADP non-farm employment change (December): value 41K; forecast 49K; previous -29K;

2. Job Openings and Labour Turnover Survey (JOLTS) (November): value 7.146M; forecast 7.610M; previously 7.449M;

3. ISM Services Index (December): value 54.4; forecast 52.2; previously 52.6;

4. ISM Manufacturing Index (December): actual 47.9; forecast 48.3; previous 48.2;

5. Initial jobless claims: actual 208K; forecast 213K; previous 200K;

6. Crude oil inventories: value -3.832M; forecast -1.200M; previous -1.934M;

7. ISM index for services regarding prices (December): value 64.3; forecast 64.9; previous 65.4;

8. ISM index for industry regarding prices (December): value 58.5; forecast 59.0; previously 58.5;

9. Factory orders (m/m) (November): value -1.3%; forecast -1.1%; previously 0.2%;

10. Consumer credit (November): value 4.23B; forecast 10.10B; previous 9.24B;

China

1. CPI index (y/y) (December): value 0.8%; forecast 0.8%; previous 0.7%;

2. PPI (y/y) (December): value -1.9%; forecast -2.0%; previous -2.2%;

3. Caixin Services PMI (December): value 52.0; forecast 52.0; previous 52.1;

4. Foreign exchange reserves (USD) (December): value 3.358T; previously 3.346T;

Currency market

This week, the euro (EUR) strengthened against the Polish zloty (PLN) by 0.05%. The euro traded in a range of 4.2075 – 4.2188.  

Similarly, the US dollar (USD) strengthened against the Polish zloty (PLN) by 0.80%. The dollar traded in a range of 3.5874 – 3.6246.  

Oil and gold market

The price of Brent crude oil rose by 3.63%. The price fluctuated between 59.84 and 63.88 USD/barrel.  

Similarly, gold rose by 4.06%. The price of gold fluctuated between 4,364.30 and 4,525.79 USD/ounce.  

Stock exchange

The WIG index rose by 1.14%. The WIG index price fluctuated between PLN 119,226 and PLN 122,425.  

Cryptocurrencies

The price of Bitcoin (BTC) rose by 1.20% and fluctuated between PLN 322,222 and PLN 339,699.  

Important events of the past week

US aggression and market reaction: Donald Trump announced the takeover of temporary control of Venezuela following the arrest of Nicolas Maduro and renewed his proposal to purchase Greenland, suggesting that a refusal could affect the future of NATO. Despite the unprecedented nature of these actions, financial markets reacted calmly, considering the events in Venezuela to be a one-off incident with no risk of wider escalation. Investors ignored geopolitical tensions in favour of macroeconomic data, resulting in no sharp market shifts.

Controversial EU agreement with Mercosur: The Council of the European Union has approved an agreement with Mercosur abolishing customs duties on goods from South America. The decision was made despite opposition from Poland and protests from farmers fearing an influx of cheap food. The agreement was pushed through thanks to a change in Italy's position and the procedural bypassing of the European Parliament, which is causing political tensions within the Community. However, this event did not trigger an immediate reaction in the euro, which remained under pressure from lower-than-expected inflation readings at the time.

The MPC's shift weakens the zloty: ‘Dovish’ signals from the Monetary Policy Council, including Ireneusz Dąbrowski's statement about a 50% probability of a rate cut in January, interrupted the Polish currency's winning streak. The market began to price in more aggressively the scenario of monetary policy easing by the NBP, which resulted in an increase in bond yields and a weakening of the zloty. As a result, the EUR/PLN exchange rate rebounded above 4.21, ending the period of strong appreciation of the domestic currency observed at the beginning of the week.

Good data from the US supports the dollar: Friday's US labour market data (NFP) showed an increase in employment of 50,000 jobs and an unexpected drop in the unemployment rate to 4.4%. These results, combined with a 3.8% increase in wages, revised expectations for the Fed. Investors stopped pricing in a January interest rate cut in the US, which was a direct impetus for the dollar to strengthen across the broad market. In response to this data, the EUR/USD exchange rate fell to around 1.1660, and the dollar also gained against the zloty (USD/PLN), rising by 0.80% over the week.

Events worth watching this week

Outlook for the zloty: The week will open with Monday's Bank Gospodarstwa Krajowego bond auction (12 January), which will test demand for domestic debt. However, the most important event for the zloty will be the interest rate decision scheduled for Wednesday, 14 January, which is particularly important in the context of market speculation about a possible cut in the cost of money. The picture of price pressure will be completed by Thursday's final CPI inflation reading (15 January) and Friday's publication of the core inflation index (16 January).

Outlook for the euro: Investors' attention will focus on Thursday's publication of the minutes from the last ECB meeting, in which the market will look for clues about the future path of interest rates in the eurozone. The final CPI inflation data from France (Thursday, 15 January) and Germany (Friday, 16 January) will also be important for the single currency. Volatility in the EUR/USD pair may be further increased by speeches from central bankers, including Monday's speech by ECB Vice-President Luis de Guindos.

Outlook for the dollar: The turning point of the week will be Tuesday's release of the CPI inflation index (13 January, base forecast 2.7% y/y), which will directly affect expectations for the Fed. The condition of US consumers and producers will be verified by Wednesday's retail sales and PPI inflation data (14 January), as well as the Fed's Beige Book published on the same day. The week will close with Friday's industrial production readings and the preliminary University of Michigan sentiment index.

Outlook for the pound: The pound may be shaken by the speech of Bank of England Governor Andrew Bailey scheduled for Tuesday, 13 January. The fundamental picture of the British economy will be outlined by Thursday's data (15 January) covering GDP, industrial production and the trade balance for November. Earlier, on Tuesday, the market will learn the retail sales index, which will shed light on consumer sentiment in the UK.

TREASURY DEPARTMENT

AFORTI.BIZ