It is a long weekend in Poland, investors may look less closely at market events. Hence, in this commentary, we present what is happening on financial markets and how recent macroeconomic data were developed.
Before August 15, investors were clearly frightened by the prospects of an impending recession, when the German economy contracted and the yield curves in the United States and Great Britain inverted. In the last 50 years in the USA, every time when the inversion of the yield curve was observed, then after an average of 18 months a recession appeared. It seems that this mainly led to a huge decline in stock indices around the world. Now the situation seems to be stabilizing.
Donald Trump led the situation to calm down. The US president announced that he would soon have a telephone conversation with Chinese President Xi Jinping. Investors see this announcement as an opportunity to reduce the tension in the trade conflict between the two nations. In the currency market, this was supposed to translate into the strengthening of the Australian dollar, which is at the highest levels compared to the New Zealand dollar in six weeks.
AUD/NZD, daily chart. Conotoxia trading platform
Meanwhile, in New Zealand, 10-year bond yields fell below 1 percent for the first time in history to 0.979 percent. What's more, the PMI signaled the first decline in production since 2012, which falls to 48.2 points. The RBNZ (New Zealand Central Bank) analysis shows that interest rate cuts should continue to increase GDP and inflation. Hence the weakness of NZD.
After a sharp decline on Thursday, August 15, the Polish zloty stabilizes. At some point, the USD/PLN exchange rate exceeded 3.94, the euro 4.39, and the pound cost over 4.78 PLN. Currently, the largest correction is observed on the EUR/PLN pair to the level of 4.35. However, due to the summer break, the next meeting of the Monetary Policy Council will take place in the first half of September and only then we will hear comments on the extraordinary weakness of the Polish currency.
In turn, the major currency pair EUR/USD fell below 1.1100 to a two-week low after comments from the representative of the European Central Bank. Olli Rehn said that a significant monetary easing package is needed in September. The interest rate market is already valuing the option of cutting rates by almost 20 basis points.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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