Strong US Fundamentals
On Tuesday afternoon we received several important readings from the USA. The first to fire were the leading indicators, which are the first to reveal the current state of the economy because they are based on surveys of business managers. The services PMI did rise in April to 51 points (expansionary zone above 50 points), but at the same time it showed the first decline in new orders in two years, with costs and prices again rising sharply.
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Meanwhile, the more important indicator in the US is the ISM services index, which fell to 53.6 points but remains more than decent. The new orders index fell very sharply, and the price index stayed high at 70.7, the highest since the end of 2022. In practice analysts read this as a slowdown in demand with still persistent cost inflation.
The first week of the month is also a period of readings from the American labor market, whose good condition is one of two (alongside low inflation) mandates for the Fed. Yesterday's JOLTS showed a slight decline in the number of vacancies (6.866 million), but employment clearly increased (by 655 thousand).
Additionally, there was a significant upward revision in February data. This arrangement again proves the resilience of the labor market, meaning there are still no signals for further rate cuts on this side.
The oil market reading was strongly surprising, but the surprise scenario has become almost a rule in this case. According to API data, US oil stocks fell by 8.1 million barrels, gasoline by 6.1 million, and distillates by 4.6 million — meaning it was fundamentally a clear surplus reading for oil. However, these fundamentals are currently moving to the background, and for black gold the key signals come from the Middle East.
Without "Freedom" a weaker USD
Currently Donald Trump has drawn a de-escalation card in his approach to the conflict with Iran. Actions under the "Freedom Project" (i.e., protecting ships passing through the Strait of Hormuz) are to be suspended, and the agreement with the Iranians is expected to be much closer than the day before yesterday. It is difficult to assess how much the latest comments from the US president will translate into real de-escalation and (most importantly for markets and the economy) into the unlocking of transit from the Persian Gulf.
Despite such doubts, investors want to strongly believe in the end of the conflict and a return to business as usual (if that is even possible). Therefore oil prices intensified declines, the July Brent contract is just above 108 USD per barrel, and the June WTI contract has approached round 100 USD. Risk on also dominates capital markets; yesterday we saw further records on Wall Street. Today in Asia green has become widespread, led by the Korean KOSPI (+6.5%, but there is an additional impulse related to AI and semiconductors). The opening in Europe is also strong, with the German DAX rising 1.2% and the French CAC40 similarly.
Behind the base markets follows Warsaw, where the WIG20 is already gaining almost 1.5%. Finally, better market sentiment hits the US dollar, which weakens noticeably after market breadth. The EUR/USD rate reaches 1.173 USD, translating into a drop in the USD/PLN rate below 3.62 PLN.
Finally, the euro falls to about 4.24 PLN, which may not fundamentally change the arrangement on this pair, but is a positive signal for the Polish zloty. What impulse from monetary policy will come to the domestic currency we will see later today when we learn the RPP decision. At the end, the royal metal again sees a wide stream of capital; the price of gold per ounce is again close to 4700 USD.
Today in the macroeconomic calendar it is worth paying attention to the decision of the Monetary Policy Council, which we will learn in the afternoon hours.
