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23.11.2007 - Currency Markets Weekly Brief - Zloty still under pressure

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Date: 2007-11-23 15:53

It is getting more and more tedious to count consecutive historical peaks on EURUSD, not to mention other pairs with the dollar. Investors expected the Fed to become increasingly more inclined to their view of softening economy and a need of interest rate cuts, and the Fed delivered it in minutes published on Tuesday. Slightly better data on the US housing market were neglected and the EURUSD marched to 1,4965 on Friday morning. The last part of this move was driven by strengthening yen – signalling growing risk aversion. At 1,50 we may face some psychological barrier, however it may well be conquered next week.


Zloty is still being influenced by depreciation of the dollar and high risk aversion, the two factors working in the opposite direction. Fear of global risk proved to be stronger and therefore zloty is still in a corrective move against the majority of currencies, after a massive appreciation over the whole 2007. USDPLN is relatively the most stable because of the weakness of the dollar. Even though we see a strong resistance against an appreciation below 2,48, USDPLN does not rise significantly above 2,50 neither.

On the fundamental front, data on output and net inflation were generally neglected as a hike (by 25bp) next week is already priced in. Forex did not react to Prime Minister’s introductory speech and will remain indifferent for as long as the euro entry date is not announced. 


Przemysław Kwiecień