Afternoon analysis 24.10.2017

The Polish currency is slightly weaker but within the range of the previous day’s fluctuations. The euro and dollar are stable before the ECB meeting and voting in the US (Thursday). Positive sentiment on the market weakened the franc.

Weaker zloty and franc

In the morning, the Polish currency has been slightly weaker in relation to yesterday's closing. This may be relatively surprising given the stable valuation of the euro and the dollar, and also positive sentiment in the stock market. Lower risk aversion was most often a favourable factor for zloty appreciation. During the morning hours, one euro cost approx. 4.228 PLN, while a few hours later it was even slightly more than 4.24 PLN. The dollar, in turn, cost a little over 3.60 PLN, about 1 gr more than in the morning.

After the initial weakening in relation to the franc (price per CHF increased to 3.66 PLN), in the following trading hours of the Swiss currency in relation to the Polish zloty, it fell close to yesterday's level (about 3.65). This was caused by a global franc's weakening (which was also influenced by good sentiment on the market) - the USD/CHF quotations increased to about 0.988, slightly above yesterday's level. This meant the cheapest franc in relation to the dollar since the middle of May this year. The EUR/CHF rose again above 1.16 and has reached its highest level since the release of the peg to the euro (mid-January 2015).

The calendar of scheduled events for the following hours is relatively limited. At 3.45 p.m., October's preliminary PMI data for the US industry and services sectors will be released. In both cases, an increase of 0.4 points and 0.3 points is expected, respectively. Although in the case of the US economy more important impact on the dollar have the ISM readings, in the context of a relatively empty calendar they may slightly increase the dollar's volatility (particularly in the case of major deviations from the consensus).

Tomorrow's preview

At 10.00 a.m., the Ifo Institute will publish October's data on the German business climate index. In the previous month, this index fell unexpectedly from historical records (115.9 points), although the decrease was small (by 0.7 points). Now, the median of market expectations assumes that this level will be maintained. Remaining in the range of historical highs could help to maintain a good market sentiment, which in turn, may support the valuation of emerging countries' currencies (lower risk aversion).

Half an hour later, the Office for National Statistics (ONS) will publish Q3 data on the GDP growth pace. The final data for the second quarter turned out to be unexpectedly worse than the two readings published previously and indicated economic growth of 1.5% in the annual term, the slowest since Q3 2013.

This is mainly due to weak consumption, which is also caused by decreasing real wages of British people. The median of market expectations points to a further decline in the economic growth pace (in Q3) to 1.4% year-to-year. A slower growth pace that indicated by consensus would mean the slowest economic development pace since Q2 2012 and could exert supply pressure on the pound.

On the other hand, the Census Bureau, will publish orders for durable goods in September. After two months of disturbances in these readings (in June and July) caused by one-off orders from the aviation sector, in August orders increased by 1.7% in comparison to the previous month, 0.7 percentage points above expectations. The median of market expectations assumes that orders will fall to 1% YOY and orders without transport by 0.5%.

Taking into account that these readings may indicate the level of industrial output and that there are no more significant publications this evening, the level of US fluctuations may increase in the case of noticeable deviation of the index from the consensus. However, a potential change in the dollar's valuation appears to be limited due to Thursday's statement after the ECB meeting and probably another vote in the US on the revision of the 2018 budget.