Unexpected drop in inflation
The MPC received an unexpected surprise from May inflation data. Inflation turned out to be even lower than in April, falling from 3.2% to 3.1%, below our forecast of 3.4% and the very high market consensus of 3.7%.
It was partly a gift from luck, a record drop in food prices in May, but thanks to this the inflation path for this year has lowered and although a return to the target (2.5%) is still doubtful, we will remain rather within an acceptable range of fluctuations (1.5-3.5%) and with moderate labor market data and a strong zloty, this gives the Council some comfort in observing the situation.
Oil prices remain very high
The biggest variable remains the situation in the Middle East. Oil prices – although lower than at the height of the conflict – remain much higher than before the war, and global reserves are melting, creating the risk of sustained pressure for months. Additionally, logistics disruptions translate into price pressure through other channels.
From this perspective, the March cut still seems to make little sense, but for the central bank, which does not like to change direction (no one does), May data were probably a great relief. With them, expectations for rate hikes in Poland have adjusted.
Globally, the foreign exchange market shows great stability. Good sentiment comes from the AI boom, so it does not harm the dollar, and on the contrary – it may turn out to help it, as investments are mainly in the USA, which can lead to a relatively hawkish Fed stance (though the issue of a new president also complicates matters a bit). Meanwhile, for now, the main pairs show great stability, which also helps the zloty stay within a narrow band of fluctuations…
Today there are theoretically quite important releases – the US ADP report (14:15) and the ISM services index (16:00).
However, recently markets have almost stopped looking at data – Wall Street lives on artificial intelligence, Middle Eastern commodities, currencies wait.
Therefore, fireworks should not be expected. If any, perhaps on Friday, with the NFP for May.
At 9:20, the euro costs 4.24 zloty, the dollar 3.65 zloty, the pound 4.91 zloty, and the franc 4.63 zloty.
