Andrea Leadsom withdraws from the elections for the Conservative Party leader, as well as for the United Kingdom prime minister. Lower fuel quotations worldwide should decrease the fuel prices in Poland. The zloty wore-off clearly this afternoon, and is now at the end ot the emerging markets currencies list.
There was yet another turn in the British politics earlier this afternoon. Andrea Leadsom withdrew from the elections for the chair of the Conservative Party, as well as for the United Kingdom prime minister. The pound started to gain value and the GBP/USD has crossed the 1.3000 level.
Appreciation of the British currency can be partially justified. Investors will not wait for the new prime minister until the beginning of September. This is because Theresa May will most likely be appointed for this position relatively quick. She does not have any rival for the time being. This decreases the market uncertainty. It will be possible to appoint the new cabinet sooner, as well as begin the negotiations with the European Union.
Moreover, Leadsom was the Brexit supporter. This could increase the tension between Brussels and London, if she was elected. On the other hand, May wanted the United Kingdom to remain within the European Union. However, this support was rather limited. During the past few days she clearly stated that she will respect the referendum results.
Some of the market participants continue to speculate that there will not be an actual Brexit, or that it will only be theoretical. However, it is difficult to assume that this is a likely scenario. It would take new parliament elections that would have to be victorious for the EU supporters. Moreover, it would be necessary to conduct a new referendum that would be won by the EU supporters.
However, acceleration of electing a new prime minister, as well as of the start of actual negotiations decreases the risk for the pound. Especially taking under consideration that May's attitude may be more pragmatic rather than ideological. Thus, it is possible that the pound will keep its growths from today, until the Bank of England meeting on Thursday.
Fuel and zloty
An unusual situation happened in the fuel market. Despite the high season, the fuel prices in Europe, as well as in the United States decrease. Price of unleaded 95 ARA fuel from the Dutch shipyards was at the level of 1.70PLN per liter, at the end of May. At the beginning of July, it was 1.58 PLN per liter, and currently it is only 1.40 PLN per liter. A similar decrease scale has been observed in the USA.
Depreciation of fuel prices are not only a result of a decrease in oil prices that was caused by an improvement of situation in Nigeria or a possible return of Libya to the market. A part of the slate mining is most likely to return to the market. This is because, according to Barker Hughes, the drilling in the USA is increasing for a few weeks.
The United States is also dealing with a fuel supply that is 10% larger than one year ago. Moreover, the fuel demand may not be that strong, as it was recently estimated by the EIA. This is because the weekly data in the monthly report is revised down.
As a result, we may also expect a visible depreciation of the PB 95 at the Polish gas stations. It is possible that unleaded fuel may cost less than 4.30 PLN within the perspective of one or two weeks.
Part one of the European session was neutral for the zloty. However, the PLN was the weakest among the emerging markets currencies this afternoon. It lost approximately 0.6% against the forint, among others. The weakness is seen on the main currencies as well. The EUR/PLN is at the 4.40 level and the franc costs 4.08 PLN.
It is difficult to say what was the reason behind the zloty's wear-off. Perhaps investors are afraid of the government meeting regarding retirements tomorrow, or the Fitch decision on Friday. This is even more surprising because the general global sentiment is positive, and it is confirmed by a positive behavior of many other emerging markets currencies.