On Monday afternoon, the Polish currency slightly strengthened against the European currency (to PLN 4.23 for one euro) and the American currency (to PLN 3.63 for one dollar). Taking into account the period since the outbreak of the war in Iran (end of February), the lowest EUR/PLN exchange rate was around 4.232, and USD/PLN around 3.58.
The current quotations are 0.38 percent respectively. and 1.3 percent higher than at the beginning of this year, which is not a big increase considering how much was happening on the market after the US and Israel's attack on Iran and how much volatility there was.
Bank Millennium analysts pointed out that at the end of last week, market sentiment was supported by hopes that the end of the conflict in the Middle East would come closer. “The media reported on the new negotiated agreement between the US and Iran, which would include, among others, a ceasefire for 60 days, lifting the blockade of Iranian ports within 30 days, and gradual demining of the strait. If these hopes are maintained this week, we see the potential for the zloty to strengthen, but the scope of this move should be limited due to the still high uncertainty.“- they wrote in their weekly report.
They added that US President Donald Trump said on Sunday that the Iran agreement had not yet been fully negotiated. “We assume that the EUR/PLN exchange rate will remain in the range of 4.22-4.255 this week” – they assessed. They added that as for USD/PLN, with the stabilization of the EUR/PLN exchange rate and the assumption of a relatively stable EUR/USD exchange rate, they see little room for changes in the coming days. “The next important technical resistance will be 3.666,” they noted.
The yields on domestic bonds also fell, in the case of 10-year bonds, to 5.78%. Let us recall that at the beginning of last week the yield on Polish 10-year treasury bonds exceeded 6%. However, Bank Millennium analysts do not rule out an upward revision of the yield rates on Treasury securities in the coming days. They added that the market is currently pricing in approximately two interest rate increases in the horizon until the end of the year (one increase has been “underestimated” in recent days).
The increase in the yield of our treasury bonds (which means a decline in their prices) is the result of the situation on world markets after the attack by the United States and Israel on Iran. The depreciation of treasury bonds also affected the so-called base markets, i.e. major countries such as the USA or Germany.
All eyes on developments in Iran
US President Donald Trump said on Sunday that the agreement with Iran had not yet been fully negotiated. On Saturday, Trump said the Iran deal had been “largely” negotiated and the final details were being discussed.
The Iranian authorities also indicated that the signing of the agreement was not certain. “It is true that consensus has been reached on many of the issues discussed, but no one can claim that the signing of an agreement is imminent,” Iranian Foreign Ministry spokesman Esmail Baghaei said in response to a question about progress in negotiations with the US during his weekly news conference.
American Secretary of State Marco Rubio announced that day that the US was ready to start serious talks about the Iranian nuclear program after Iran opens the Strait of Hormuz.
-Controversial issues such as Iran's nuclear plans, uranium enrichment and control of the Strait of Hormuz remain potential obstacles. The agreement may amount to little more than an extended ceasefire, perhaps with few details, possibly regarding the passage of tankers through the strait – said Kyle Rodda, senior financial market analyst at Capital.com.
