Over the last two trading days, the złoty (PLN) has weakened against the euro by 1.3%. This is the largest correction since the US presidential election (November 5, 2024). Interestingly, at the same time the eurodollar also fell by about 1.3%. This is the first such situation (since the US election) that the PLN weakens when the dollar strengthens against the euro. Of course, this is all related to the failure of the talks between Ukraine and the US. The FX market (PLN, HUF, CZK) interprets this failure as a smaller chance of concluding peace/ceasefire in Ukraine (i.e. further war). See Figure 1.
We will see whether this interpretation holds in the coming days.
In his latest podcast entitled "Trump, Putin and Changing Global Realities", George Friedman discussed in detail the realities of geopolitics and possible solutions. But as history suggests, at the end of the day, geopolitics may have little to do with morality...
George Friedman: “the consequences of geopolitics is power, it is not what you want to do or what you think is moral, it is what you must do and what you can do. And so in this particular case as in many cases where nations were victimized by geopolitics like Vietnam which we fought not because we cared about Vietnam but because we wanted to stop communism and signal that we would not stop at anything to do it. So there are victims when systems change.”
According to Friedman, it is at this moment that we are dealing with a change in the system as a direct result of Russia's defeat in Ukraine: "the critical thing to understand is that when Russia invaded Ukraine and failed the world changed. It was not the other way around.”
And some more: “Russia lost the war in Ukraine. The Russian army could not defeat what is nearly a third world country for three years, it failed, this is a massive failure by the Russians”.
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