No significant changes in the main currency pair - the market is waiting for Friday's data on consumer inflation in the US. The zloty felt the sell-off on the ruble and lira.
EUR/USD still around 1.16
The main currency pair, i.e. the euro to the dollar (EUR/USD), oscillated around the level of 1.16 another day in a row. The market is clearly waiting for a stimulus, and this stimulus will probably be tomorrow's data on consumer inflation in the US in July. Until then, the chances of more significant movements seem to be limited.
Slightly weaker condition, in turn, is observed today on the zloty, which may be the result of the overestimation of ruble and lyre at the same time. Although these are not yet significant changes, the EUR/PLN exchange rate exceeded the level of 4.27 and the USD/PLN pair approached 3.69. The zloty lost out slightly in relation to most of the major currencies, including the regional forint.
Macro data from the US economy published in the afternoon also did not provide an impulse for market changes. The number of unemployment benefits submitted last week was once again a positive surprise at 213,000 (7,000 below consensus). This is only 5,000 above the lowest level since December 1969 recorded a month ago. Although this is rather a secondary indicator in terms of its impact on the dollar, it still confirms the very good condition of the US labour market and supports the likelihood of rapid economic growth.
On the other hand, PPI inflation turned out to be slightly below expectations in July, falling by 0.1pp to 3.3% y/y. Similarly, the core index, which amounted to 2.7%, was lower. However, these are still readings close to multi-year highs, so their impact on the dollar will be very limited. The calendar of macroeconomic publications until the end of the day is virtually empty, hence the likelihood of significant changes in the dollar or in the Polish zloty seems to be limited.
Pressure on the pound last week increased after the probability of a "hard" Brexit increased. The macroeconomic situation and monetary policy have therefore been somewhat sidelined. Tomorrow, however, the Office for National Statistics (ONS) will publish data on industrial production for June and the rate of economic growth in the UK (in the second quarter), which could have a significant impact on the pound.
The growth rate of industrial production fell significantly in April and May, to 1.6% and 0.8%, respectively, on a year-on-year basis, while significantly disappointing market expectations. They point to a further slowdown in production growth to 0.7% in June, which would also be the worst result in one year. On the other hand, the median of market expectations concerning the GDP suggests its growth in the second quarter by 1.3% compared to the same period of the previous year. Taking into account the Brexit issue, the growth potential of the pound may be lower than that of the deepening of its decline, depending on published data.
On 2:30 p.m. we will know probably the most important data of the day. The Bureau of Economic Analysis (BEA) will publish a Consumer Inflation Index (CPI) in July in the US. Core inflation rate (excluding energy and food prices) will be the most vital reading, and the market consensus points toward maintaining 2.3% year-on-year. A deviation of 0.1 percentage points from this level may cause significant fluctuations of the dollar, and in the case of an increase above 2.3% - new 10-year records. A strengthening of the dollar, on the other hand, could cause supply pressure on the zloty, although its relatively good condition could protect it from a deeper sell-off.