Iran-USD situation remains tense, though little changes
Since Thursday afternoon, when reports appeared that a peace memorandum is only awaiting signatures from the leaders of both countries, we are in a state of suspension. The Trump administration claims it is not "hurried" to sign it, while Iran is flooded with speculation suggesting a strengthening of hardliners with the IRGC, which is however denied by local media. Both sides have also returned to "military posturing", and Israel is intensifying military operations in Lebanon, which does not inspire optimism.
Eurozone rate hike almost certain
The market reaction is a slight risk-off, more visible in commodities – we see a rebound in oil and a pullback in gold prices. EURUSD remains relatively stable around 1.1660 after Friday’s local peak at 1.1685. Despite lower preliminary May CPI readings in key Eurozone countries, the market regards the ECB’s planned June 11 rate hike as almost certain.
Meanwhile, the prolonged lack of an agreement with Iran may increase pressure for a Fed rate hike – the market still prices such a move for December. For now, a more significant thread may be the upcoming Fed meeting with Kevin Warsh (June 16) and a series of speculations from the new president’s “dove” stance, starting with concerns about long‑term institutional independence.
The Polish zloty’s reaction to the lack of specifics on Iran is practically invisible. This is due to the EURUSD, but also the relatively good market sentiment.
Glapiński will postpone a hike until July or even fall
Data released this morning on the industrial PMI for May surprised positively – we see a rebound from 48.8 points to 49.4 points. Better than expected were also the data on Q1 GDP – according to the final reading, the economy grew at 3.5% year‑over‑year versus 3.4% in early estimates. Tomorrow we have the Monetary Policy Council meeting, and the day after the president’s speech.
In the context of a lower May CPI reading (preliminary data we learned on Friday indicated 3.1% year‑over‑year versus 3.2% in May and expected 3.7% year‑over‑year), the Council may have more comfort in planning a rate hike decision. It is almost certain that it will wait until the July inflation projection is published, and perhaps even until the fall, if there are no clear indications for such a move.
Daily EURPLN chart
Daily USDPLN chart
Prepared by: Marek Rogalski – chief market analyst at DM BOŚ
