Economic Analysis

In today's Eyeopener:

- Today preliminary July PMIs for Germany and the euro area
- Growth rate in new industrial orders normalized to 11.7% y/y in June
- The ECB left interest rates unchanged, in line with expectations
- Brent crude oil rose above $100 per barrel
- The zloty weakened, markets priced in a greater scale of interest rate hikes in Poland

The middle of the holiday season can hardly be described as a quiet period this year. The conflict in the Middle East has once again entered an escalatory phase, pushing up oil and gas prices and rekindling concerns about inflationary effects. As a result, the domestic interest rate market has shifted from pricing in rate cuts immediately after the dovish press conference of the NBP Governor at the beginning of the month to once again pricing in rate hikes. By the end of this week, forward instruments were pricing in roughly two 25 bp rate hikes over the next 12 months (...)

June retail sales significantly exceeded expectations, accelerating to 6.2% y/y from 3.0% y/y in May, driven mainly by a strong rebound in durable goods and improving food sales. Together with resilient consumer confidence and broadly improving business sentiment, the data support our view for GDP acceleration in 2Q26 and beyond. (...)

The 60-day ceasefire agreed by the US and Iran has sent a wave of optimism across markets. Even though the peace talks are still in progress, with the final result uncertain and shipping through the Strait of Hormuz remaining subdued, oil and gas prices have decreased to their lowest levels since early March, significantly reducing worries about further deterioration of the economic outlook. The return to business-as-usual will probably take some time and the disruption in global commodity supplies witnessed in 2Q has already taken its toll on 2026 inflation and GDP forecasts, but at least the risk of further revisions due to rising energy costs has declined. That should allow markets to focus on other issues, like the surprisingly hawkish rhetoric of the new Fed chair or the extreme heatwave sweeping through Europe with a potential to affect not only food prices but also economic activity (...)