Afternoon analysis 10.05.2017

10.05.2017 15:23|Bartosz Grejner

Today’s session in the currency market was calm, due to the lack of significant macroeconomic data. The zloty continues to benefit from the positive sentiment.

Depreciation of both yen and franc has slowed down

Due to the lack of significant macroeconomic data, the currency market has been fairly calm today. The recent overvalue of the yen has faded away slightly. The USD/JPY went slightly below the 114 level. Moreover, the GBP/JPY went from 148 to 147.5.

Even though the EUR/CHF has been slightly below 1.10, the franc’s depreciation wasn’t as rapid as it has recently been. The franc’s wear-off has most likely been caused by a decrease in uncertainty regarding the future of the eurozone. This might have resulted in a lower demand for less hazardous assets, which include the Swiss currency. Therefore, the EUR/CHF may remain above the 1.10 level in the long-term.

The dollar has been floating within a relatively narrow range and the profitability of the US treasury bonds have decreased. This might have caused the dollar’s appreciation to slow down. The EUR/USD has been within the range of 1.086-1.088. As a result, the dollar’s index has been within a fairly narrow quotation range as well. Currently, this index is slightly above the level of 99 points.

Zloty is becoming stronger

All things seem to be in favor of the zloty. Limited risk within the region has been resulting in the depreciation of the safe havens (the yen and gold, among others). This has strengthened the zloty against the main currencies. The CHF/PLN has gone below the 3.85 level, which is just 0.05 PLN away from its minimum from September 2015.

The zloty’s wear-off against the franc seems quite unlikely, for the time being. Moreover, there is a larger likelihood that the franc would continue to wear-off. This may be caused by further growths on the EUR/CHF.

Tomorrow’s events

At 10.30, the Office for National Statistics (ONS) will publish the data regarding the British industrial production for March. This index reached the level of 2.8% in February. Currently, the market consensus is at the level of 2.1%. The data regarding particular components of industrial production will also be significant. The estimates regarding industrial processing are currently at the level of positive 3% MoM.

At 13.00, the Bank of England will publish its decision regarding the monetary policy. No changes in this field are expected. However, the BoE will also publish the minutes from its previous meeting, which will most likely be more significant for the market. If the minutes indicate that the British monetary authorities have been considering a more rapid monetary tightening, this will be positive for the pound.

Tomorrow’s information may cause increased volatility on the pound. Taking into consideration the recent appreciation of the British currency against the dollar, as well as the fact that the dollar’s condition has improved over the past few days, depreciation of the pound seems more likely than appreciation. Currently, the GBP/USD is slightly below the 1.30 level.

At 14.30, the US Labor Department will publish the weekly jobless claims. This index has been near its forty-four-year minimum since the end of February. Currently, the market consensus is at the level of 245k (238k, previously). However, the amount of insured unemployed has been fairly positive over the past few weeks (fewer than 2 million people).

Also at 14.30, the Bureau of Labor Statistics will publish the American PPI for April. This index has been in an upward trend over the past few months. However, consumer inflation index slowed down previously. The same phenomenon is expected in the case of the PPI. This index was at the level of 2.3% YOY and currently, the market consensus is at the level of 2.2% YOY.

The dollar has been strengthening over the past few days. This was mainly caused by an increasing likelihood of rate hikes at the forthcoming Federal Reserve’s meeting. A positive report from the US Labor Department, as well as a minor decline of the PPI, would help sustain the appreciation trend on the dollar.


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