Daily analysis 29.08.2017

29.08.2017 10:46|Bartosz Grejner

Geopolitical factors and other positive data from the German economy helped the EUR/USD pair surpass the 1.20 boundary. The dollar's weakness also causes new USD/PLN lows to settle at less than 1 gr against the lowest exchange rate since the end of 2014.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

  • Conference Board consumers' confidence index (estimate: 120.3 pts, previous estimate: 121.1 pts).

Greater risk aversion

This morning, the euro cost over 1.20 USD. The last time when the EUR/USD crossed that boundary was just over 2 years ago. The pair was already close to this boundary on Friday and on Monday (when the Jackson Hole conference significantly weakened the dollar while strengthening the euro).

Exceeding the 1.20 boundary on this currency pair seemed to be a matter of time. Today, investors received some arguments for the weakening of the dollar. Above all else, market sentiment significantly worsened geopolitical tensions (i.e. the launch of Korean missiles over Japan).

Clearly the risk aversion has risen as assets have incurred some losses due to the fact that they have been exposed to a relatively higher risk. Main indexes of European exchanges lost 1% - 1.5%. In turn, so-called "safe harbors" - including gold, the franc and the yen, have gained in value and gold reached 1330 USD per ounce today (the most in 11 months).

The reason for the euro's strengthening was also given by the GfK Institute by publishing the German consumer climate index. It rose to the highest level in the current month since November 2001. This was primarily a result of really high estimates of future incomes, which were at their highest level since the German reunification.

According to previous research by other institutes (i.e. sentix, ZEW Institute), expectations of the future German economic situation, after five months of growth, have been slightly below the line. It should be added that these are still significantly higher than levels from last year in the analogous period - 30.4 points against nearly 22 points less a year ago.

The calendar is relatively limited later in the day. At 4 p.m. the Conference Board will present August's consumer confidence index in the US. It is expected to drop from 120.3 points to 121.1 points. Although it is larger than the expected decline, it could further weaken the dollar. The forex market will be most likely be a result of global sentiment today. If it continues to deteriorate (also during the US session), the dollar could be subjected to even greater supply pressures.

New lows on the USD/PLN pair

This dollar weakness has caused the USD/PLN exchange rate to fall to around 3.53 - the lowest level since the 18th of May 2015. There was less than 1 gr between the current rate and the lowest rate since the end of 2014. This is still possible during today's session if we observe further dollar depreciation.

However, the Polish currency was in a slightly weaker condition today due to the market's worsening sentiment, on which the zloty is particularly vulnerable. Further deterioration - especially in the afternoon if the main US stock indexes would be decreased - could weaken the zloty.

However, it wasn't large until around 11am and was within the fluctuation range of the last days. Increased levels may be observed in the second part of the day when US investors will be more active.

 


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