Peace getting closer?
Recent media reports indicate that the USA and Iran were to agree on a peace memorandum, which would be a prelude to 60‑day further negotiations. This is beginning to convince markets that the conflict could actually deescalate and – most importantly – bring the world closer to restoring transport in the Strait of Hormuz.
Although the document is still awaiting approval from the leaders of both sides, it represents the beginnings of concrete agreements that reduce risk. As a result, investors are looking favorably on capital markets, as evidenced by gains also on the Warsaw market. Unlocking the critical strait also gives a breath of relief to the energy commodities market. Oil prices are falling.
The U.S. dollar has remained below 90 USD per barrel since yesterday afternoon, with a local low of 87.3 USD. Optimism is also visible in forex, where a safe‑haven dollar sale is ongoing. The euro benefits, with the EUR/USD rate rising from yesterday’s local low of 1.159 USD to even 1.166 USD, and on Friday morning trading around 1.164 USD.
It’s not that bad!
Peaceful reports are not the only positive news from the market. Today we learned preliminary consumer inflation data in Poland, which was expected to rise from 3.2% YoY to 3.7% YoY, but fell to 3.1% YoY. Moreover, on a monthly basis, deflation of -0.3% MoM was recorded. This is a significant drop compared to the previous increase of 0.6% MoM.
Interestingly, the report for the “Electricity, gas and other fuels” category showed no change compared to April (0% MoM). This is important information that, combined with the potential restoration of full traffic in the Strait of Hormuz, reduces inflationary risk caused by an external factor.
For our portfolios this is good, but the currency rate also reacts to the publication. Since price dynamics did not exceed the NBP target (as estimates suggested), the pressure from the Monetary Policy Council to raise the cost of money is decreasing.
The victim of such a combination is the zloty, which weakens on forex after the publication of this data.
The EUR/PLN rate after 11:00 rises to 4.235 PLN, the USD/PLN to 3.639 PLN, the GBP/PLN returns to 4.878 PLN, and the CHF/PLN to 4.639 PLN.
Stabilization signals beyond Poland
Inflation is not rising as strongly as markets forecasted in France and Spain. In the first of the mentioned countries, consumer prices rose by 2.4% YoY (a jump from 2.2% YoY to 2.6% YoY was expected). Additionally, on a monthly basis, a significant reduction from 1% MoM to 0.1% MoM was recorded.
Meanwhile, on the Iberian Peninsula, CPI remained at 3.2% YoY, despite an expected increase to 3.4% YoY. On a monthly basis, similar to France, the index returned to 0.1% MoM (previously 0.4% MoM). The data indicate a relative normalization of the situation, undoubtedly influenced by slow economic growth combined with limited consumption.
The situation looks similar across the ocean. According to yesterday’s U.S. publications, consumer inflation for April slightly rose from 3.2% YoY to 3.3% YoY, as expected, but the annualized GDP at 1.6% YoY fell below the forecasted 2% YoY, and the pace of American spending dropped to 0.5% MoM (previously 1% MoM).
