Strong changes in the foreign exchange market!  What a shot for the US dollar!  The specter of recession scares… our scenarios

fot. Changes in the forex market! The rise of the US dollar! The specter of recession scares… our scenarios

A strong dollar hurts emerging market assets in the first place. Thus, a very difficult year for Polish stocks is behind us, but the first signs of the end of the rate hike cycle in the US (including low inflation) have weakened. dollar, which immediately caused a dynamic rebound in risky assets, especially those that the powerful “green” had been choking the most so far. The possibility of it turning into a recession in the region euro Quite large, which also makes it closer to Poland as a trading partner.

Also check: See what experts say about the future of currencies, the embattled zloty

However, the most important factors will be:

  • The state of the US economy that though Fed’s hawkish policySo far, there is no “desire” to calm down, which is shown by the good data from the labor market and the improvement in consumer confidence indicators,
  • The impact of the potential post-pandemic opening up of the Chinese economy on global demand and the potential downturns it could trigger.

Rising wages may be one of the factors that may stand in the way of gradual easing of monetary policy on a global scale. The pandemic seems to have left behind some changes in the US labor market that will put pressure on wage growth. It turns out that thanks to the assets owned (real estate, shares, Digital currenciesPart of the community felt financially independent enough to leave the local labor market and not return to professional activity after the pandemic.

Also check: Exchange rate earthquake! The worst is yet to come…

  • 2023 is likely to be a period of economic slowdown caused by very high nominal interest rates.
  • in the basic scenario Peak inflation in the United States Behind us, while inflation in Poland may rise further in the first quarter of 2023, after which it will begin to decline, however, it will remain at a double-digit level for the whole year or the vast majority of it.
  • Declining inflationary pressures and a weak economy may prompt central banks to cut interest rates gradually towards the end of next year.
  • With such developments, the first half of 2023 could be a good one for bonds, This is mainly due to the currently high profitability.
  • The second half of the year and expectations of lower interest rates may be supported by long-term bonds, followed by stocks.
  • in stock condition Next year will be a time to get back to the basics of economics, and stocks of traditional economy companies with healthy balance sheets without excessive debt may do relatively better.
  • A positive scenario assumes a dynamic decline in inflation while avoiding recession.
  • In the negative scenario, higher interest rates along with deteriorating consumption could lead to another debt crisis.

Also check: Black clouds over the major currency exchange rates!

Strong changes in the foreign exchange market!  What a shot for the US dollar!  The specter of recession scares us... Our scenarios - 2

  • In the case of stocks, next year will be a good time to return to the basics of economics, and stocks of traditional economy companies with healthy balance sheets without excessive debt may do relatively better.
  • A positive scenario assumes a dynamic decline in inflation while avoiding recession.
  • In the negative scenario, higher interest rates along with deteriorating consumption could lead to another debt crisis.

Also check: Shocks for the dollar (USD), the euro (EUR) and the pound sterling (GBP) in April? See what experts say about the current situation

PKO Bank Polski - Market Analytics

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