Afternoon analysis 26.09.2017

The euro remained under electoral pressure - the dollar has been the strongest in relation to the single currency area for a month. The zloty is clearly incurring losses, probably due to the outflow of capital from emerging countries.

Further dollar appreciation

Today until 3 p.m., there were no planned macroeconomic publications that could have a significant impact on the Forex quotations. The result of the German elections continued to be a slight burden for the euro, we continued to observe the decline in value, especially in relation to the dollar. The EUR/USD quotations fell below 1.18 for the first time in a month and around 3 p.m. the quotations were in approx. 1.178 level, which meant a decrease of approx. 0.5% compared to the level of the day before.

The stronger dollar, also supported by a relatively hawkish statement from the last monetary committee meeting of the Federal Reserve, also gained in three days in a row in relation to the pound. The GBP/USD rate fell to the 1.34 boundary - the lowest rate since September 15th. Continuation of this upward trend in the US currency caused the dollar index (DXY) to increase to 92.9 pts and at the same time reach the highest level since September 1st this year.

Compared to yesterday, the sentiment on the market was rather neutral until 3 p.m. Both, the contracts for the headline indexes of the US stock market and European indexes, did not show any significant changes. A slight recovery of yesterday's increases in value could be seen on the yen, the pound or gold, perceived as a "safe haven" in situations of increased uncertainty and risk aversion.

Given that it is most likely that today's speeches by French President Emmanuel Macron and Janet Yellen, the President of the Federal Reserve, will not have a significant impact on the currency market, and the sentiment on it is unlikely to change significantly. However, it may deteriorate in the case of further reports related to, i.a. tensions in the Korean Peninsula.

Zloty slightly weaker

Despite the fact that today's sentiment on the market was not bad (as opposed to yesterday), the next trading hours meant the weaker zloty today. For the first time for a week, the EUR/PLN pair exceeded 4.29. At the same time, the relation of the pound to the Polish currency (GBP/PLN) climbed to the highest levels for over four months, reaching 4.89. This is only 2.2% from the psychological boundary of 5 PLN per pound, which was observed for the last time on May 12th.

The zloty's depreciation may have been influenced by several factors, including i.e. for the time being, the dovish statement of the Monetary Policy Council in the context of potential monetary tightening in the US and the eurozone, or geopolitical tensions of recent days, which may generally cause capital outflow from emerging markets. However, if we do not observe market sentiment worsening and the headline indexes of the US markets will not significantly lose value, the chances of continuing the zloty's depreciation are limited.

Tomorrow's preview

At 2.30, the Census Office will publish August's data on durable goods orders in the US economy. We have seen significant changes in these levels over the past two months, due to very high orders and one-offs in the aviation sector. In June, they increased by 6.4% in monthly terms, while in July they fell by 6.8%. The core index of orders (excluding transport orders) remained more stable, which increased in those months by 0.1% and 0.5% respectively.

Median of expectations currently points to an increase of 1% in the headline index over a month and an increase of 0.2% in the core reading. Given the recent appreciation of the US currency, especially in relation to the euro, in the case of a deviation from consensus, these data may slightly increase dollar volatility as they may give investors some indication of the level of investment in the US economy.

Two hours later, the Energy Information Administration (EIA) will provide a weekly report on the US fuel market. Yesterday, the price of WTI oil rose to five months' highs, following the Kurds' independence referendum (which may result in oil supply interruptions) and geopolitical tensions in the Korean Peninsula (which is not the rule). Investors' attention in the EIA report will focus on the change in oil supplies and its products and on the change in production.

A further increase in oil stocks (by 2.3 million barrels) and a decrease in distillates by 2.5 million barrels and petrol by 1 million barrels are expected. Oil production, which fell during the hurricanes that hit the US a few weeks ago may also continue to grow. The last week's report showed an increase by 157k barrels daily, i.e. 1 million barrels more than a year ago.

An increase in oil supplies close to consensus and a further decline in supplies of its products, may support the high level of prices we are currently observing. This may, in turn, help to value the currencies of countries which exports are mainly based on oil exports, i.e. China, Canada, Russia or Norway. It should be remembered, however, that its prices are subject to significant fluctuations and the tension connected with the Kurds' referendum on independence may cause significant fluctuations.