Dollar again declines (Daily analysis 26.02.2018)

26.02.2018 12:20|Bartosz Grejner

The zloty is saved from losses due to a cheaper dollar and good market sentiment. The Labour Party may be in favour of a "soft" Brexit. Important data on inflation will be published on Wednesday and Thursday.

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

  • A lack of macro data may noticeably impact the analyzed currency pairs.

Stable situation on the zloty

Monday morning maintained the positive sentiment observed in the market on Friday evening. Around midday, the main European market indexes appreciated by almost 0.5%. The dollar also depreciated with a small scale of changes. Therefore, those are positive signals for the Polish currency and the probability of zloty's depreciation is limited.

Especially due to the fact that today's calendar of scheduled events does not include events that could have a significant impact on the market. If a significant dollar appreciation and market depreciation are not observed (limited probability), the quotations of the zloty may fluctuate around current levels, and the dollar or the euro's value should not differ significantly from 3.38 PLN and 4.17 PLN, respectively.

The situation on the pound may be different. During the weekend, the media (such as Bloomberg, Wall Street Journal, The Washington Post) reported that the British Labour Party may change its position on Brexit. Monday's speech by Jeremy Corbyn indicates a call for a closer relationship with the European Union after Brexit, especially in the case of customs policy.

Until now, Corbyn presented rather a Eurosceptic view. The change is probably made to undermine the already weakened position of Prime Minister May. This morning, the pound appreciated in relation to the dollar, the euro and the zloty after the aforementioned reports, which may have suggested a slightly closer relationship with the EU. However, May’s weaker position and the actions taken by the opposition may increase the chances of early elections. This element of uncertainty could have a negative impact on the British currency.

On the broad market, taking the coming days into account, significant changes in the middle of the week can be expected. On Wednesday, February data on consumer inflation (CPI) in the eurozone will be published. In the data, the core index is crucial (excluding the impact of the most volatile prices), which probably won’t exceed 1.0% and should limit the euro's growth potential.

January's PCE inflation data in the USA may be relatively more important (this is the inflation type that the Federal Reserve takes into account when making projections). Consumer inflation data for January turned out to be higher than expected - exceeding the value of 1.5% by the PCE core index by even 0.1 percent could cause a significant appreciation of the dollar, which in turn could have a negative impact on the entire zloty basket's value.


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