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Afternoon analysis 25.04.2017

25 Apr 2017 15:31|Bartosz Grejner

The positive market sentiment continues. The emerging market currencies (in eastern Europe) have been gaining and the safe havens have been losing. Over the past two days, the zloty has gained more than 2% against both the dollar and franc.

Dollar is wearing-off

No significant macroeconomic readings were planned for today. The currency market has been determined by the global sentiment, which is a result of the result of the French presidential election and the announcement of revealing changes in the US tax system tomorrow.

Yesterday, both the European and the American stock markets increased. The increased risk appetite was emphasized by a decrease in value of the safe havens (gold, the yen), as well as by an increase in the eastern European emerging market currencies.

This caused the dollar’s index to remain near its level from yesterday (99 points). We need to keep in mind that this is the same level as before the American presidential election. Nevertheless, the dollar’s behavior was different in particular currency pairs.

The EUR/USD went below the 1.09 level. However, the USD/JPY increased up to approximately 110.6. Tomorrow, the dollar may be even more volatile, due to the potential revealing of the tax system changes in the USA.

Zloty is one of the strongest currencies

The zloty has gained approximately 2.5% against the dollar over the past two days. This caused the USD/PLN to reach its lowest level since November 2016. Moreover, the Polish currency gained approximately 2.2% against the franc.

Nevertheless, the zloty’s appreciation against the euro wasn’t as spectacular. The EUR/PLN went below 4.23. After its recent growth, the pound lost approximately 0.12 PLN against the zloty..

However, the zloty’s positive streak may end tomorrow, if the White House announces the tax system changes. Nevertheless, the impact of this information should mainly be limited to the USD/PLN, but we can’t exclude slight declines against the euro, pound or franc as well.

Tomorrow’s events

At 14.00, the Polish Central Statistical Office (GUS) will publish the unemployment rate for March. This index increased up to 8.6% and 8.5% in January and February, respectively. However, this was a result of an increased number of expired job contracts, hence more registered in unemployment offices. Therefore, the unemployment rate is estimated to return near its level from December (8.2%). Taking into consideration that a decrease in the unemployment rate is expected, this reading’s impact on the zloty seems to be limited.

At 16.30, the American Energy Information Administration (EIA) will present its weekly report regarding the fuel market. Even though the US oil supplies have been decreasing over the past two weeks, they remain near their historical maximum. In addition, the oil production has been increasing. This combination is causing negative pressure on the oil prices.

According to the market consensus, supplies will go down by 1.3 million barrels. However, it seems that increasing activity of American producers is even more dangerous. If it appears that this index has been growing for another consecutive week, this may result in a further decrease in the oil prices. This would be negative for the oil currencies, such as the Canadian dollar, Norwegian krone, Brazilian real and Colombian peso. Theoretically, such a scenario would also be negative for the Russian ruble. However, the Russian currency has been experiencing a strong upward trend recently. Therefore, the oil prices decline should not have a significant impact on the ruble.

The US President Donald Trump will most likely present a plan regarding the tax reform tomorrow. According to information agencies (including Bloomberg), the company tax will be at the level of 15%, which would be consistent with Trump’s previous announcements. The market has been expecting changes in the US tax system since the end of January. This was one of those election promises that caused the dollar to reach its historical records. If the US administration presents a plan regarding the tax reform, this may clearly strengthen the dollar.

25 Apr 2017 15:31|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:

25 Apr 2017 12:31

Daily analysis 25.04.2017

24 Apr 2017 15:30

Afternoon analysis 24.04.2017

24 Apr 2017 12:23

Daily analysis 24.04.2017

21 Apr 2017 15:23

Afternoon analysis 21.04.2017

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