Inflation is up, but the zloty has not lost. The euro exchange rate exceeded PLN 4.25

Further increases in oil prices worsened the situation of the Polish zloty, as a result of which the euro exchange rate exceeded the barrier of PLN 4.25. But in the short term, the zloty was paradoxically helped by higher than expected consumer inflation in Poland.

Since the beginning of March, the euro/zloty exchange rate has been following crude oil prices quite faithfully. The rule here is simple: higher oil means a weaker zloty and a more expensive euro. Oil is down, the euro is cheaper and the zloty is strengthening. Such a relationship has fundamental justification, if only because Poland is an importer of both crude oil and natural gas.

Meanwhile, on Thursday morning, Brent crude oil on Asian markets was as high as USD 126 per barrel, and in Europe its prices were close to USD 115/bbl. This is the result of reports about planned further US military actions against Iran, which would end the ceasefire and postpone the prospect of opening the Strait of Hormuz.

The rising oil prices have caused the euro rate to go up over the last two weeks, reaching PLN 4.2650 this morning. These were the highest prices for the euro-zloty pair in three weeks. However, the EUR/PLN exchange rate is still moving in a local sideways trend, in the range of PLN 4.2250-4.3070. This state of affairs has been going on since the beginning of the Israeli-American war with Iran.

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– We expect increased volatility to remain on the FX market (EURPLN 4.2550-4.27; USDPLN 3.6450-3.68), while on the FI market the direction of changes will still be strongly dependent on the situation on the oil market, where for now there are no signs of an end to the upward trend – this is how PKO BP economists assessed the situation.

Paradoxically, the Polish zloty could have been helped by the April CPI inflation reading, which was much higher than economists' expectations. Accelerating inflation basically removes the prospect of interest rate cuts at the National Bank of Poland and may encourage some members of the Monetary Policy Council to consider increasing loan costs.

However, our currency is not helped by the strength of the US dollar, which strengthened against the euro after Wednesday's announcement from the Federal Reserve. As a result, the dollar quotations on the Polish market rose to PLN 3.6560 – the highest level in three weeks. On Thursday morning, however, the “green” price fell by 0.8 groszy and cost PLN 3.6430.

The Swiss franc was valued at PLN 4.6158, which is practically unchanged compared to Wednesday's reference rate and close to the lowest levels since February. The exchange rate of the British pound dropped by almost half a cent, reaching PLN 4.9170.

K.K

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