Afternoon analysis 21.11.2017

Calm session in the currency market - problems with forming a new government in Germany do not worsen the market's sentiment. Good data from the British industry with a very limited impact on the pound. The zloty remained close to yesterday's levels in relation to the main currencies.

Euro slightly weaker

During today's session a gradual euro depreciation was observed. Before 3.00 p.m., the quotations of the main currency pair, the EUR/USD, fell to around 1.171, the lowest level in the week. The political uncertainty in Germany on Angela Merkel's formation of a new government contributed considerably to this fall in the euro's value. Although it is possible to hold new elections if creating a majority coalition fails, the risk of systemic change is limited.

Today, a relatively good sentiment on the market was observed- the main index of the German DAX stock exchange was almost 1% higher before 3.00 p.m., the vast majority of European stock exchanges and index futures contracts in the US were also growing. Therefore, it can be seen that the market is not afraid of subsequent choices in the largest European economy.

A better sentiment in the stock market also translated into a calm session in the currency market - changes in the main currency pairs were limited today. The pound in relation to the dollar remained close to yesterday's level (1.324 USD), despite much better than expected CBI data on British manufacturing companies.

Out of the three months leading up to November, orders in this sector increased the most since August 1988. Among the surveyed companies, 28% recorded above-average orders in this period, while only 11% below average. On the other hand, as many as 40% of them indicated higher production in the last three months, and only 12% indicated lower production. Although this is good news for the UK economy, the market will most likely respond to reports related to negotiations on the Brexit bill.

The consolidation around current levels on the currency market over the next hours are likely to be observed. The calendar of scheduled events for the following hours is practically empty, therefore the risk of main currency changes is relatively limited.

Stable on the zloty

The Polish currency quotations, like most of the main currencies, were stable today. In relation to the pound, the franc or the dollar, the zloty remained close to yesterday's levels. Before 3.00 p.m., it gained approx. 0.1% to the euro and the EUR/PLN was just under, but this was mainly due to the somewhat global weaker euro. The weaker forint, on the other hand, increased the PLN/HUF pair slightly above 74, the highest level since mid-May.

Probability of a significant change in the market sentiment or significant dollar's appreciation in the following hours is limited. Therefore, we can expect that the zloty will remain close to current levels and maintain a relatively small fluctuation range.

Tomorrow's preview

At 2.30 p.m., the Department of Labor will publish weekly data on initial jobless claims in the US. Data from a week ago showed an increase in the number of jobless claims were 249k, 14k more than expected, which was the second week in a row of their growth. In contrast, the number of insured unemployed has fallen to 44-year lows of 1.86 million people.

However, this data may still be slightly (although to a smaller extent) disturbed by September's hurricanes that hit some US states, which may limit its impact on the dollar. The median of market expectations assumes a decrease in the number of jobless claims to 240 thousand.

The Census Bureau will present October's orders for durable goods at the same time. A month ago, orders significantly exceeded market expectations, increasing by 2.2% during a month, against the expectations of an increase of 1%, which was at the same time the highest increase since June.

The market consensus indicates a slowdown in the headline index growth pace to 0.3% and the base index (excluding transport orders) to 0.5%. The data on durable goods' orders may give indications as to the growth pace of industrial production, which in October increased significantly, exceeding market expectations.

Publication of durable goods orders may potentially have a much greater impact than data from the Department of Labor. If it once again clearly exceeds the market expectations (by more than 0.5 percentage points), the dollar could appreciate due to expectations of higher than assumed industrial production.

At 8.00 p.m., the Federal Reserve will publish the minutes of the latest monetary committee (FOMC) meeting. Although the dollar's fluctuation may increase around the time of the publication, ultimately its value is unlikely to change significantly. Rate hikes in December are widely expected, therefore tomorrow's minutes are unlikely to change significantly the distribution of interest rate increases.