Afternoon analysis 08.08.2017

A lack of significant macroeconomic publications has made the volatility on the dollar or the euro very limited today. More worse than expected economic data from Germany. The zloty has been stable, but the GBP/PLN pair close to 7-year lows.

EUR/USD has been stable

In relation to the absence of significant events, the value of the dollar or the euro hasn’t changed much. The EUR/USD pair during the European session has been slightly above 1.18 and the exchange rates' deviations have been very limited. The dollar index (DXY) has remained near yesterday's level and Friday's close has only fallen slightly to near 93.1 pts. The reason for this has been due to the global appreciation of the yen, which pushed the USD/JPY rate to around 110.2, close to the lowest level since mid-June (109.8).

Matters connected with the Brexit process have also been a burden for the pound. In relation to the euro, the British currency has reached the lowest value since October 2016, the EUR/GBP rate increased to approx. 0.908 before 3.00 p.m. Since the referendum on Brexit has been held at the end of June 2016, the British currency has lost to the euro almost 18% value.

Despite this the euro has been relatively stable today, another set of weak data has emerged from the biggest eurozone's economy. After worse than expected data on the manufacturing production or the sentix economic index, today Destatis said that Germany's export has declined by 2.8% in June and import by 4.5% in relation to the previous month.

Both elements have clearly been below expectations, however, it has been the biggest monthly import drop in 7 years. Recent data may suggest that despite the good condition of Germany's economic situation, its pace of growth may decrease. There is, therefore, a risk that it may translate into a lower growth pace of the eurozone economy, weakening the common currency in the medium term.

GBP/PLN pair close to recent lows

The value of the zloty in relation to the main currencies has been relatively stable today. Until the publication of consumer inflation report (CPI) in the US economy on Friday, the Polish currency will probably be subject to limited changes. The exception today has been the pound, it has visibly weakened, especially to the euro.

However, it has also translated into a drop in the GBP/PLN pair even below 4.69. Excluding the events of early October (the so-called "flash crash"), the relation of the British currency to the Polish one has been the lowest in value since the end of August 2011.

Tomorrow's review

Tomorrow's calendar of scheduled macroeconomic publications is very limited. This week, Friday's report on US consumer inflation (CPI) will probably be the most important. Until then, chances for significant changes in the dollar or euro value are indeed low.

Tomorrow at 11:00 p.m. CET, the decision of the Reserve Bank of New Zealand (RBNZ) on interest rates will be published. Although, it has not been expected to change, the RBNZ statement may be significant for the New Zealand dollar valuation. In its previous statement from May, the Reserve Bank of New Zealand has pointed out that core inflation (excluding the most variable elements) remained on a low level among its trading partners and a moderate level of inflationary pressure was also seen inside the country.

Taking into account the recently better than expected inflation reading in the US and the eurozone, the RBNZ may slightly modify the statement, noticing somewhat higher inflationary tendencies in the world. Although it may strengthen the New Zealand currency, only a reference to inflation prospects in the country suggesting a higher growth pace of price pressures could clearly increase its value.