Afternoon analysis 19.10.2017

Better than expected macroeconomic data from the US may support a weakened dollar. Today, the external factors exerted the greatest influence on the Polish zloty.

EUR/USD pair still above 1.18

The US currency has gradually been losing value since yesterday afternoon. One euro cost even 1.184 USD today, the most since last Thursday. The dollar's weakening was accompanied by a still worse sentiment, which was initiated by reports from Catalonia. In the afternoon (at 2.30 a.m.), however, the dollar received support in the form of better than expected data on initial jobless claims.

The number of initial jobless claims submitted in the previous week amounted to 222k and was the lowest since March 31st, 1973. On the other hand, the number of insured unemployment decreased to 1.888 million and was the lowest since December 29th, 1973. Even 1.5 months ago, the number of submitted claims rose to nearly 300k and was the highest for 2.5 years. The current decline, as well as the aforementioned growth, was influenced by the hurricanes that hit some of the states in the US.

At the same time, the Federal Reserve (Fed) published the industrial output index in the Philadelphia region and showed that it has risen above expectations for the second consecutive month in September to the highest level since April this year. The aforementioned data from the Department of Labor and the Fed branch in Philadelphia historically have had no significant impact on the dollar.

However, in the context of its weakening over the last day, they can protect it from further depreciation and contribute to a fall in the exchange rate of the main currency, the EUR/USD, near the 1.180 level. However, the fate of the tax reform may be more important in the context of the dollar. Information that would indicate the possibility of a relatively rapid adoption of the law could support the dollar.

Zloty lost to the euro and franc

The Polish currency's condition was relatively stable. The zloty lost to the Hungarian forint about 0.1%. The movement on the remaining pairs was, therefore, mostly generated by external factors. The EUR/PLN pair quotations rose slightly above 4.244 boundary, with the EUR/USD rising to its highest level last Friday (1.184). The price for one franc reached a level of almost 3.68 PLN, although yesterday evening it was still approx. 3 gr less.

Poor retail sales data was still a burden on the pound. The British currency exchange rate in relation to the zloty today fell to the lowest level since September 12th and reached 4.71 PLN, i.e. it was 4.6% lower than three weeks ago. The relatively globally weak dollar caused the fall of the USD/PLN exchange rate to 3.58 PLN, close to the lower end of the quotation range since September 25th. The calendar of the macroeconomic events is empty in the following hours, so if we do not observe a deterioration of the current market sentiment, the zloty may stabilize around the current levels.

Tomorrow's preview

The calendar of scheduled events for tomorrow is limited. However, since Thursday, however, there has been a summit of the EU leaders, which can also have a significant impact on markets.

At 8.00 a.m., The Federal Statistics Office (Destatis) will present September's data on producer inflation (PPI) in Germany. In August, it increased from 2.3% to 2.6% in annual terms and it is also expected to grow further in September to 2.9%, the highest level since April this year.

Two hours later, the European Central Bank will publish the current account balance data of the eurozone in August. Last month, the surplus was 25.1 billion EUR, was higher by 2.3 billion EUR. The median of market expectations indicates that the current account surplus will continue to increase to 26.2 billion EUR in August.

However, the aforementioned data is rather second-tier in terms of its impact on the euro's. Although in the absence of more relevant early morning data, investors may be slightly more focused on it. If the above readings do not fail to meet market expectations, the euro may appreciate given the relatively weak dollar's condition.