Hope for the opening of the Strait of Hormuz
The zloty is strengthening today in the market and is praised by the Ministry of Finance, although the latest retail sales data do not inspire optimism. What should investors expect in the coming days?
Oil price decline and dollar weakness
Undoubtedly, the main event of last May Monday was the emergence of another hope for the end of the conflict in Iran. Over the weekend, many rumors appeared about the official extension of the ceasefire along with the real opening of the Strait of Hormuz.
Although largely speculative, many comments are flowing from both the U.S. and Iran, stoking investor hopes.
Oil loses more than 5% during Monday's session, and the dollar weakens in the broad market, sparking euphoria in the precious metals market and in futures contracts on Wall Street.
Finance Minister on adopting the euro
Against the backdrop of global geopolitical turbulence, significant statements echo from the national backyard. Finance Minister Andrzej Domański unequivocally cut speculation about adopting the euro, describing the topic as secondary and absent from the government's agenda.
Domański emphasized the strategic value of having its own currency, noting that the RPP's interest rate policy (currently the reference rate is 3.75%) is far better suited to the national economic cycle than it would be if decisions were made by the European Central Bank.
It is worth noting that the head of the National Bank of Poland, Prof. Adam Glapiński, has repeatedly praised the zloty, which flexibly adapts to market conditions and allows faster overcoming of global shocks.
Poorer retail sales data
Although such information seems good from the perspective of the Polish zloty, the latest data show some problems in the domestic economy at the beginning of the second quarter. Retail sales rose only 1.3% y/y in real terms, with expectations at 2.8% y/y and a March rise of 8.7% y/y.
In monthly terms, a decline from strong March was recorded at -0.8% m/m from a previous level of about 18.1% m/m. Nominally it looks slightly better, as the increase was 2.8% y/y versus expected 1.5% y/y and a previous reading of 9.8% y/y.
Although today's reading looks weak, it is worth noting that some of the poorer results can be explained by one-off factors such as Easter or seasonal shifts in clothing and footwear purchases, which according to detailed data occurred a month earlier.
At the same time, in April we observed a stronger rise in the fuel segment than in March, which may have been related to filling up tanks to the brim to guard against potential upcoming price hikes at stations.
It is worth emphasizing that this data allows us to weather uncertainty about the current situation and not rush to raise interest rates. Moreover, this also coincides with a fairly strong slowdown in wage dynamics, which we learned last week.
Current currency rates in the market
The zloty looks quite solid at the beginning of the last week of May and some market observers point to the potential for the Polish currency to strengthen against the dollar or euro, especially if real progress is made in negotiations between the U.S. and Iran.
Today, just before 12:00, we pay 3.6347 PLN for the dollar, 3.2324 PLN for the euro, 4.6520 PLN for the franc, and 4.9045 PLN for the pound.
