Afternoon analysis 25.09.2017

25.09.2017 15:07|Bartosz Grejner

The American currency was appreciating after the elections in Germany. The president of the ECB's statement without a major impact on the euro's valuation. The Polish currency was stable in relation to the euro after the results of the parliamentary elections in Germany were announced.

Further dollar's appreciation

The US currency started the day with value increases and this trend continued in the following hours. The dollar's appreciation trend was clearly visible in relation to the euro. The EUR/USD exchange rate fell below 1.19 to approx. 1.186 - the lowest level since September 14th, 2012. Pressure on the euro was also exerted by slightly worse than market expectations readings of consumer confidence index (Ifo Institute) and slightly weaker results of the CDU and SDP parties in elections than previously estimated.

At 3 p.m. Mario Draghi (President of the European Central Bank) made his speech. Essentially, he repeated his earlier observations that an accommodative monetary policy is still required. He stressed that there were some uncertainties about the inflation's prospects. Draghi's statement has caused a little bit more volatility in the quotations of the currency pair, which exchange rate increased from approx. 1.186 to 1.189 around the publication's time.

Given that the speech coincided with the views expressed at the last press conference following the ECB's Governing Council meeting, the risk of further significant changes in the EUR/USD trading, as well as indirectly other currency pairs, is low.

EUR/PLN practically no changes

The range of changes in the EUR/PLN exchange rate was relatively small today. The aforementioned pair moved in a relatively narrow range of 4.265-4.278, around 3 p.m., remaining close to the 4.27 boundary. Near to Friday's closing was moving the CHF/PLN pair, from Thursday it remains below 3.70. Therefore, the impact of the elections in Germany on the zloty was relatively small.

The valuation of the Polish currency was worse in relation to the dollar or pound. Both currencies appreciated around 3 p.m. by 0.6% to the zloty. While in relation to the dollar, the zloty's valuation remains attractive in recent months, the GBP/PLN exchange rate has stayed close to the highest one in four months. On the one hand, high inflation and the perspective of monetary tightening may help the pound, but on the other hand, further uncertainty about the Brexit negotiation process and a lack of details regarding the transition phrase may put pressure on it, preventing further rapid appreciation.

Tomorrow's preview

The calendar of scheduled events on Tuesday (September, 26th) is relatively limited. Therefore, the probability of significant changes in exchange rates is also low. Tomorrow, members of the Federal Reserve Monetary Committee (FOMC) will give speeches, including Janet Yellen, the President of the Federal Reserve (6.45 p.m.).

Last week's meeting showed that despite mixed data coming from the US economy in recent months, FOMC is still determined to raise the main interest rate by 1 percentage point until the end of 2018. No deviation from the views presented last week should be expected, which may support the current trend of the dollar's appreciation.

In turn at 4 p.m. the Conference Board will publish August's consumer confidence index in the USA. Last month, its level unexpectedly rose to 122.9 points. Thus, only 2 points were missing to highs of more than 16-year ones achieved five months ago.

At the same time, the Department of Commerce will also provide August's data on sales of new houses. In July, their sale recorded the highest MOM drop for nearly two years (-9.4) and amounted to 571k, which was the smallest value since January this year.

Median of market expectations assumes a drop in the consumer confidence index to 120 pts and an increase in the sale of apartments by 3.3% (588k). Although the deviation of these values from the consensus may slightly increase the dollar's volatility around the time of publication, their final impact is likely to be limited. The perspective of monetary tightening in the USA continues to be at the centre of market participants' attention, and only inflation data and a labour market report may possibly result in a more significant dollar valuation (and/or reversal of a trend).

 


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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

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