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Analysis of Exchange rate Trend (PLN - EUR). Analysis of a chosen exchange
rate trend Exchange rate under analysis: Euro against ...
Submitted by eldominos on April 20, 2008
Category: Business
Words: 2166 | Pages: 9
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Analysis of a chosen exchange rate trend
Exchange rate under analysis: Euro against Polish Zloty (EUR/PLN)
The trend period under analysis: 1/12/2006 – 28/02/2007 (3 months)
Introduction
Following an approximate three-month trend of the Euro depreciating against the PLN up to the beginning of December 2006, the next period of over 2 months is of an upward trend. I will be analysing this upward trend and its causes, followed by a turnaround of the general movement. As the exchange rate goes from February 2006 through March 2006, a steady downward trend is developing, which implies a turnaround in future expectations at the end of the investigated 3-month period.
Leading up to December 2006
The Euro area
The growth rate of the Euro area has been relatively low for recent years, specifically not exceeding 2% from 2001 to 2005 . Nevertheless a significant ‘boost’ had occurred in 2006. A 2.7% growth rate in the second quarter provided expectations of even higher rates in the following quarter but weren’t reached with an actual result of 2.6%. Even though inflation slowed to 1.6% in October, the ECB expected a 2.4% annual inflation rate for 2006, an excess of 0.4 percent over its 2% target . As a result of this growth and inflation rate increase over the year, interest rates were increasing by 0.25% every 2 months since June until November 2006 (refer to appendix). At that time the ECB informed of its intentions to raise interest rates yet another 0.25%, up to 3.50% in December . Even though the Euro area had showed signs of slowing, the ECB’s rather “hawkish” policy implied the forthcoming increase may not even be the last.
Poland
Poland’s entry into the EU in 2004 spurred its already high rate of growth and is now enjoying significant inward investment as a result of...
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