Afternoon analysis 04.10.2017

04.10.2017 15:01|Bartosz Grejner

So far, low volatility on the EUR/USD has been observed this week - this may change even today, during the speeches by the presidents of the central banks in the US and the eurozone. The Polish currency in better condition due to the stoppage in the dollar's appreciation and awaiting the MPC.

Low volatility on the EUR/USD pair

The volatility level on the main currency pairs was relatively limited. The slight dollar's weakening could have been observed, although it was within the range of the last days' fluctuations. The element that could cause pressure on the US currency is the anxiety on the future identity of the person who replaces Janet Yellen and will be a new President of the Federal Reserve.

In the main currency pair quotations, i.e. the EUR/USD pair, the euro's strengthening in relation to the dollar could be observed until 2 p.m., when the exchange rate reached approx. 1.179 level. However, at 2.15 p.m. the ADP published data on employment in the private sector - an increase in payrolls by 135k in September turned out by 10k higher than expected and it may indicate that also Friday's official data on employment will be slightly better than expected.

The aforementioned publication has resulted in the EUR/USD return to approx. 1.176. In the past few days we have observed the euro's quotations consolidation to the dollar in the range of approx. 1.17-1.18. It seems, that only the market's expectations for Friday's readings from the US labour market or tomorrow's minutes from the ECB will be able to provide arguments for breaching the rate beyond this range.

Zloty in better condition

The stoppage of the dollar's appreciation was noticeably favourable to the Polish currency, which today gained in relation to most main currencies (up to 0.5%). The decisive element about further zloty quotations may be the afternoon statement and a press conference of the Polish Monetary Policy Council. If there are any elements suggesting monetary tightening before the end of 2018, the zloty could continue to appreciate which we have seen since the morning.

In turn, if such suggestions were not found both in the statement or during a press conference and the scenario with a lack of increases would be maintained even until the end of 2018, the zloty could start to lose the profits generated in the first half of the day. It should also be noted that the zloty's quotations may also depend on the dollar's behaviour.

In the next part of the day, we will have speeches from the President of the Federal Reserve (and from the President of the ECB) - if the US currency was to appreciate significantly in response to them, the zloty could be a subject to sale pressure and consequently lose value.

Tomorrow's review

At 1.30 p.m., will be published minutes from last (September's) ECB's monetary committee meeting. In the context of the euro's valuation, issues related to the exchange rate for the euro and the winding down of the bond-buying program may be relevant. Since the last trading session, the single currency has clearly weakened, i.a. due to the German elections, the perspective of further monetary tightening in the US and the events in Catalonia. A mention of these issues could, therefore, increase the fluctuation range of the euro, although the current lower level of the euro's valuation may make the final impact of this publication limited.

An hour later, the US Department of Labor will publish weekly data on initial jobless claims, the levels of which in recent weeks have been affected by hurricanes that hit some parts of the US a month ago. Last week's report indicated the number of jobless claims at the level of 272k. The median of market expectations currently points at 265k new claims. Their level with each week is likely to decrease and will tend to reach levels before the hurricanes, approx. 236k.

At the same time, the Bureau of Economic Analysis (BEA) will publish August's data on the US trade balance sheet. July's deficit (43.7 billion USD) was close to June's level (43.5 billion USD), which in turn, was the lowest since October last year. The market consensus indicates a fall to 42.7 billion USD in August. If both of the figures for jobless claims and the deficit were lower than expected, the dollar could appreciate. However, this is rather second-tier data and its impact, even in this positive scenario, is likely to be limited. Markets' attention will be more focused in the coming days on the Friday's labour market report.

 


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