Afternoon analysis 20.09.2017

Reuters reports of the ECB exiting the quantitative easing increase the volatility on the EUR/USD pair. The zloty is supported by a slightly weaker euro and significantly better data from the Polish economy. The EUR/PLN pair depreciate to approx. 4.28 level.

During a relatively calm afternoon on the foreign exchange market, Reuters published a piece of information in which, referring to people from the European Central Bank, suggests that information on the decision to wind down the quantitive easing does not have to be made at the meeting in October.

Similar speculation has occurred before last ECB statement and also has put pressure on the euro. The later QE exit by the ECB, the smaller chance to sustain the current EUR/USD increases. In general, however, according to Reuters, no decision has been taken so far. The main currency pair fell to 1,1955, but after a few dozen minutes a significant part of the losses was reduced.

In the context of the afternoon data from the US real estate market, there was a significant acceleration in the number of new building permits issued in August. The investments started were, on the other hand, slightly below forecasts. Additional information presented by the Census Office does not show that Hurricane Harvey, which hit Texas, had a clear impact on the readings. The number of households touched by the natural disaster was relatively small. Irma, which affected the people of Florida, may have a much greater impact on September's reading. However, these readings will not be available until next month. Overall, there are no breakthroughs in the current figures and the market is likely to continue to wait for the FOMC's meeting tomorrow.

Reuters' information and very good data from Poland

The afternoon was favourable for the zloty. Reuters' reports of the possible ECB's later withdrawal from QE supported the national currency. The second positive impulse was the clearly better than expected readings from the domestic economy.

Industrial production was especially positive. It increased by 8.8% YOY, with expectations close to 6.0% YOY. Retail sales from Poland were also above consensus, but in this case, the difference was not as great as in the production readings. Sales increased by 7.6% YOY, and expectations of economists were close to the 7.0% boundary. A relatively slight deviation from forecasts was visible on the recently very volatile construction output (23.5% YOY, 0.5 points below estimates). As a result, information on the ECB has influenced the positive data from Poland. According to this, the EUR/PLN before 3 p.m., the euro was quoted close to the 4.28 boundary. It's almost 1.5 gr less than around midday.

Today's events are reducing the risk of EUR/PLN breaching the 4.30 level. On the one hand, the ECB's exit from QE may be slower than expected, which should support the zloty, and on the other hand, today's good data should reduce the likelihood of further dovish comments from the Polish MPC.