EURUSD broke support at 1.1570
The initial phase of Monday’s session was driven by rising global risk aversion linked to escalating tensions in the Middle East after overnight mutual attacks between Israel and Iran. As a result, Brent crude rose by over 5%, and the dollar strengthened on the broader market, further supported by growing expectations of rate hikes by the FOMC after Friday’s strong US labor market report.
In the afternoon market sentiment improved slightly after Iran declared an end to the attack on Israel, which slowed the dollar’s appreciation. However, this did not change the trend picture for the currency pairs we monitor, where EURUSD remained below the broken support near 1.1570 from Friday, and USDPLN hovered near resistance at 3.68.
Euro rate – forecast for the coming days
On Tuesday, with a quiet domestic macro calendar and no major global releases, the zloty will remain under the dominant influence of external forces. Both macro fundamentals – especially the rising valuation of US rate hikes in the short term, driven by clearly rising inflation alongside a stable labor market – and the technical situation should support further dollar appreciation.
The zloty, like other currencies of net energy-importing countries, is also hampered by a lack of credible signals of a positive breakthrough in Middle East peace negotiations.
Our baseline scenario for the near future remains an increase in the USDPLN rate above 3.70 and a shift of EURPLN closer to the upper bound of the sideways trend, ranging between 4.22–4.26.
Domestic debt market
On Monday, domestic SPW yields changed in the range +1/+13bp. In the 10‑year segment, bond yields rose by 6bp to 5.87%, while on the base markets US Treasuries and German Bunds increased by 1–2bp, respectively to 4.55% and 3.06%.
After Friday’s session, during which US bond yields rose sharply due to the release of labor market data (NFP) indicating surprisingly strong US economic health, the new week began with another active rate‑setting session.
On Monday, geopolitical factors again drove the continuation of yield rises. The ongoing ceasefire in the Middle East and the ongoing negotiations between the US and Iran proved fragile and susceptible to destabilization.
According to media reports, there was an exchange of rocket attacks between Israel and Iran, which pushed Brent crude to around 98 USD/b and raised yields in global markets in the first part of the European session. The domestic market followed the momentum from base markets, and 10‑year SPW yields temporarily exceeded 5.90%. Sentiment improved in the second half of the day. Yields clearly retreated toward opening levels after reports suggesting an end to the exchange of fire between the parties under pressure from US President D. Trump.
Forecast – economists expect market stabilization
We assume that positive signals from the US economy and a slower-than‑expected pace of normalization in the Middle East will serve as arguments against a deeper decline in yields in the short term. We expect a market stabilization near current levels in the near‑term session horizon.
