PLN Commentary – EURPLN stuck at resistance near 4.29
This may indicate that investors are starting to realistically assess what the Fed, led by Kevin Warsh, can actually do. After a relatively "hawkish" message more than a week and a half ago, the time has come for verification in the form of current data.
The PCE and PCE Core inflation figures released last Thursday were basically in line with estimates, exhausting the current pro‑dollar momentum. Meanwhile, regarding data, this week will be specific due to the U.S. Independence Day (250th) celebrations on Friday – key U.S. Department of Labor data for June will be released on Thursday, while ISM for manufacturing and ADP will come on Wednesday, and tomorrow we will see JOLTS and the Conference Board consumer confidence index.
EURUSD will remain a key indicator for the zloty
The situation on EURUSD will remain a key indicator for the zloty. Markets have stopped reacting to Middle East news, treating recent events as "specific" to those negotiations.
Nevertheless, it is worth considering that the probability of extending talks for another 60 days at the end of August remains high. What matters is how oil behaves, and after recent clear declines there is no inclination for a rebound (a plus for the broader macro picture).
The EURPLN pair reached last week near resistance around 4.29 and is struggling to break through – but remains (still) above 4.28. Meanwhile, USDPLN has fallen three cents from last week’s peak to 3.7550 following EURUSD, which has risen above 1.14.
Daily EURPLN chart
Daily USDPLN chart
This week we have a chance for further dollar pullback if the falling U.S. data are not seen as clearly "hawkish." This could help the zloty. It will also be useful to glance at global market sentiment – a return to gains on Wall Street would be another argument (regardless of the weak Asian market performance this morning).
