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Afternoon analysis 10.01.2018

10 Jan 2018 15:36|Bartosz Grejner

The zloty in a slightly better condition in relation to the dollar, which was caused by a noticeable weakening of the US currency. The dovish message at the MPC conference and slightly worse sentiment on the market may lead to zloty depreciation in the following hours if dollar appreciation takes place.

Interest rates in Poland without changes

The Monetary Policy Council (MPC) decision to leave interest rates unchanged in Poland was in line with expectations. At 4:00 p.m., the National Bank of Poland will publish the statement after a two-day meeting. At the same time, a press conference will also start with the President of the NBP and the President of the Council, Adam Glapiński.

Recent data on consumer inflation for December indicated a 2% year-on-year level, which failed to meet the market's expectations and was 0.5 percentage points lower than in November. This makes the scenario of an accommodative MPC message more possible, which may have a negative impact on the zloty.

The zloty pared a part of the losses incurred yesterday in the morning, although later it depreciated. The rapid weakening of the dollar was helpful in the fall of the USD/PLN, which was caused mainly by the comments of the Chinese officers who, according to Bloomberg, stated that the US Treasury bonds were less attractive, which may suggest a limited demand for them from China.

Around 3.00 p.m., the USD/PLN pair was close to 3.49, although, in the morning, one dollar cost 0.02 PLN more. Moreover, the EUR/PLN was also below the morning level, the scale of the fall was by about half lower and at 3.00 p.m. its exchange rate was around the 4.183 boundary. The US currency weakening and worse than expected data on the UK's trade balance (an increase of the deficit to 12.2 billion GBP in November) caused the GBP/PLN exchange rate to fall by 0.03 PLN to slightly below the 4.72 level.

In the following hours, the zloty condition will depend mainly on the dollar's behaviour. The EUR/USD quotations, after the aforementioned message of the Chinese officials, increased from about 1.193 to 1.20. During the next few hours, a slight recovery of this rapid growth can be observed and the US currency may once again appreciate in relation to the euro.

The dollar's appreciation combined with potentially negative internal signals (dovish message from the MPC) and slightly worse sentiment on the share market (the losses of the main indexes in Europe and futures contracts in the US) may cause a weakening of the zloty in the afternoon.

Tomorrow's preview

The European Bureau of Statistics (Eurostat) will publish November's data on industrial production in the eurozone at 11.00 a.m. In the previous four months, activity in this sector exceeded the market expectations and showed yearly growth in the 3.4% - 3.9% (3.7% in October) range. The median of market expectations indicates the industrial production growth pace to fall to 3% in November.

The lower growth pace may be caused by a high base in the analogical month in 2016 when a 3% increase in production was observed (in October it was only 0.8%). Tomorrow's reading of 3% or more may strengthen the euro and improve the market sentiment, which in turn, could have a positive effect on the zloty.

At 1.30 p.m., the European Central Bank (ECB) will publish a record of the discussions during the last Governing Council meeting. Taking account the subdued inflation in the eurozone, the probability of the QE tapering or the need to increase interest rates seems to be limited. Therefore, the so-called "minutes" will have a limited impact on euro quotations, although the fluctuation range may slightly increase around the publication time.

An hour later, the US Department of Labor will publish weekly data on the initial jobless claims. The number of claims increased to over 240k in the previous three weeks, although a month ago it amounted to 225k, approaching 44-year lows. The number of insured unemployed has also risen above 1.9 million. The market consensus indicates 248k and 1.915 million respectively.

Although this is rather secondary data in terms of the impact on the dollar quotation. Another report with readings above consensus may slightly weaken the dollar, taking into account its appreciation since Friday. However, it should be remembered, that the most important publication this week is Friday's data on consumer inflation in the USA and only this publication may significantly affect dollar valuation.

10 Jan 2018 15:36|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

10 Jan 2018 12:53

Daily analysis 10.01.2018

9 Jan 2018 15:28

Afternoon analysis 09.01.2018

9 Jan 2018 12:44

Daily analysis 09.01.2018

8 Jan 2018 15:11

Afternoon analysis 08.01.2018

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