Weaker data from the US (US spending estimate in May, broad measure of inflation index PCE) caused yesterday a weakening of the dollar and a break of € / US $ from 1.0380 to almost 1.05. The debt markets also reacted to the same factor, where we recorded a further strengthening on both the dollar and the euro curve.
Lower-than-expected data on spending deepen earlier concerns about the propensity of Americans to consume, as a result the market-valued target interest rate is lowering and this is detrimental to the dollar. Still, € / US $ fluctuates rather sideways, as the euro zone has its problems that limit the scale of the strengthening of the single currency. Markets are distant at the announcement of rate hikes by the ECB.
Yesterday yields in the core markets also fell from the same level. Our yesterday’s observation is confirmed that the market reacts less and less to hawkish signals from central banks, and more and more to surprises with lower inflation or weaker data on economic activity.
However, we still believe that in the coming weeks the yields of German papers may be more resistant to signs of economic slowdown than in the case of USD bonds. The ECB is just starting the cycle of rate hikes, there are more and more votes for a 50bp rate hike in July.
The zloty tested yesterday at 4.65 in the morning, but lost during the day and the € / PLN pair retreated to almost 4.71 yesterday, despite a simultaneous rebound of € / US $ during the day. The low correlation with € / US $ could have been related to the end of the month and the closing of various positions, so the behavior of the currency may be more detached from the usual signals. The external situation is not in favor of the zloty, global slowdown, weak commodity currencies, yesterday the Swedish koruna also lost despite a large 50bp hike.