Improvement without improvement
At today’s opening, there was a strong optimism among investors. Brent crude oil ended the previous week around 104 USD per barrel.
At the time of writing this text it already costs "just" 96 USD. This shows that markets believe we are heading in the right direction and – most importantly – breakthroughs are occurring.
The media are convinced that the agreement is already close. This is evidenced, for example, by the increased movement of ships through the Strait of Hormuz compared to recent weeks.
There are still many matters to be settled. And these are the ones that, contrary to the prevailing American narrative, should not be called details.
It is unclear what will happen next with enriched uranium and the nuclear program. Iran still expects to control ships in the Strait of Hormuz. Israel believes the peace agreement is limited to Iran. Unfortunately, this list can be extended.
As a result, it is not excluded that we may soon see a correction of the current movement if talks stall.
How do currency markets react?
Along with the improvement in sentiment, changes are also seen in the currency markets. Since the opening, the dollar has lost almost half a cent against the euro from Friday’s close. This situation also affects the currencies of our part of the world.
Both the Polish zloty, Hungarian forint, and Czech koruna have gained in value since morning.
We return to an EURPLN rate below 4.24 PLN.
Thus, the PLN is the strongest in over two weeks.
Due to the mentioned movements in global markets, the strengthening against the dollar is stronger. It is worth noting that changes are also noticeable in the bond market. Bond yields are falling. This shows that capital is returning to seek better returns, rather than risk aversion as in previous days.
Weaker data from the British Isles
Friday brought weaker-than-expected retail sales readings in the United Kingdom. The year-on-year value did not change. An increase of 1.3% was forecasted. This would still be a result clearly lower than inflation, but would be a less bad outcome.
This country has not yet fully recovered from the problems it created for itself with Brexit, and local politicians responsible for that "success" are already winning further victories in local elections.
Despite these moderate economic achievements, the pound has recently gained on the improvement in risk appetite and is strengthening similarly to the Polish zloty against the euro.
The rate against the zloty has been moving towards 4.91 PLN for over a week.
Today in the USA it is Memorial Day, and there are no major macroeconomic releases on the calendar.
