On a yearly basis, inflation increased to 4.3% spurring discussion that another interest rate cut in the U.S would dangerously let inflation to increase. In the short-term, the USD gained but the trend was changed on Thursday when the Philadelphia Fed Index showed a reading of -24, the lowest in 7 years. It means that there is still danger of recession and a 50 bp. interest rate cut seems a must. Throughout the whole week, the EUR/USD increased from $1.4630 to $1.4840.

The Polish currency is still on the rise not only because of a weakening dollar. Tuesday’s publication showed that PPI inflation increased to 2.8% on a yearly basis against the forecasted 2.3% increase. At the same time, industrial production grew by 10.8% while analysts forecasted only a 6.6% increase. Such news were a surprise to the market and brought back the discussion that an interest rate hike in Poland will be necessary much quicker than the market expected. Inflationary pressures are strong (increasing wages, growing economy, higher prices) and a 25 bp. interest hike is possible even in March. The Złoty gained against the major currencies: the USDPLN declined from zł.2.4450 to zł.2.4020, the EURPLN from zł.3.5790 to zł.3.5650 and the CHFPLN from zł.2.2260 to zł.2.2105.

Adam Narczewski