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20.06.2008 - Weekly Currency Report

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Date: 2008-06-20 17:34

Due to the lack of other important macroeconomic reports this past week, investors focused on inflation data and possible future monetary policy of major central banks – the ECB and the Fed. CPI in the Euro zone exceeded analysts’ forecasts and reached 3.7% on a yearly basis. Despite increasing inflation in the U.S (confirmed by Tuesday’s PPI publication), the market expects the ECB to make the first move and hike interest rates. The EUR/USD reacted to those speculations by increasing from $1.5360 all the way to $1.5605 throughout the course of the week.


Macroeconomic publications from the Polish market surprised investors. Industrial production increased only by 2.3% in May on a yearly basis against the forecasted 7.4% increase. On the other hand the PPI reading was above market expectations confirming that inflationary pressures in Poland are still high. Slower industrial production in May should not be shocking for investors since there were two “long weekends” due to holidays. The Polish Monetary Policy Council (MPC) will probably not take into account one worse-than-expected publication and will certainly hike interest rates by 25 basis points next week. Inflation is still a danger for the worldwide economy with rushing prices of oil and food. The Polish currency has been discounting such move this past week. The EUR/PLN dropped from zł.3.3860 to zł.3.3660 while the USD/PLN declined from zł.21970 all the way to zł.2.1550.


Adam Narczewski