Stock markets turned around last week and the złoty continued its quest to new yearly highs against the euro. This time, however, the correlation with the EUR/USD was not so clear.

The main currency pair tumbled at the beginning of the week, but was unable to break the strong support level of $1.3443. The EUR/USD then turned around to reach a weekly high of $1.3736 before finishing the week at $1.3550.

Macro news from the US showed that the services sector is improving (as indicated by the ISM Services report). The US labor report was also positive, with Nonfarm Payrolls at -36,000 (against a forecast -50,000) and the unemployment rate remained at 9.7 percent.

Meanwhile, the złoty remained relatively strong. Decreasing risk aversion, due to stock market increases, was one factor appreciating the local currency. Another was Tuesday’s GDP publication for Q4 2009, which showed that economic growth in Poland reached 3.1 percent, slightly above consensus.

Even more beneficial for the złoty was news from Sławomir Skrzypek, chairman of the Polish Monetary Policy Council (RPP). Mr Skrzypek stated that the RPP might start tightening monetary policy soon. An interest rate hike from the current 3.5 percent level is not likely in the short-term, but is possible in Q2.

Over the week, the EUR/PLN declined from zł.3.9490 to zł.3.8760 (reaching a yearly low of zł.3.8698), while the USD/PLN dropped from zł.2.9015 to zł.2.8565.

Adam Narczewski, X-Trade Brokers Dom Maklerski SA