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Afternoon analysis 27.11.2017

27 Nov 2017 15:10|Bartosz Grejner

The global factors favour the zloty - new records in relation to the main currencies. The dollar continued its global weakness - the euro and yen are the most expensive for around two months.

Polish currency strengthened again

During the first session this week, the Polish currency was in a relatively better condition. It was mainly due to global factors, the still weakening dollar and the slightly cheaper franc. In the first trading phase, positive sentiment on the market caused by rising main European stock indexes also helped the zloty.

Due to such circumstances, the cost of one euro per unit fell to the 4.20 PLN, defining the lowest level since mid-July. In turn, the dollar's value fell slightly below 3.59 PLN and was only 0.5 gr short of reaching the lowest level since the end of 2014. Gradually falling CHF/PLN quotations, on the other hand, reached the value of 3.5890, the lowest since mid-January 2015. It is only 4 gr more than the price per franc before releasing the peg to the euro by the SNB.

The calendar of significant scheduled macroeconomic events for the following hours is practically empty, therefore volatility in the currency market is likely to be limited. If we do not observe significant changes in the dollar's valuation in the following hours and the market's sentiment does not deteriorate significantly, also the zloty's quotations should stabilize around the current levels.

New highs on the EUR/USD pair

Both for the dollar and the zloty, the most important event of the coming days may be the vote on the tax reform project in the US Senate, which is currently expected to be voted for on Wednesday/Thursday. The uncertainty surrounding these changes, in contrast to the improving condition of the eurozone's economy, continues to weaken the dollar. Today, the EUR/USD pair has set new 2-month highs, reaching the level of approx. 1.1960. Moreover, the globally stronger yen also contributed to the USD/JPY trading decline to the lowest level since September 18th this year (slightly below 111).

Today's afternoon quotations will probably not show significant changes. Although the volatility of quotations may increase slightly due to the increased activity of the US investors, probably only the aforementioned vote in the Senate and Thursday's inflation readings (from the USA and the eurozone) will be able to significantly influence its valuation.

Tomorrow's preview

At 1.00 p.m., GfK will publish the consumer confidence index in Germany. After reaching nearly 16 years of record in August and amounting to 10.9 points, the index fell slightly in the next month to reach 10.7 points. However, it is still very close to the aforementioned highs, and the recent data from the German economy (e.g. GDP, consumer confidence, PMI index) suggests that consumer sentiment could also improve.

The median of market expectations indicates an increase to 10.8 points, although the actual reading may be even higher. This could further improve the market sentiment and possibly strengthen the euro, but also prolong the positive trend on the zloty.

At 2.30 p.m., the Bureau of Economic Analysis (BEA) will present data on the trade in goods balance in the US for October. In the previous month, the deficit increased to 64.14 billion USD and turned out to be by 240k higher than expected, after a better than expected August of 62.94 billion USD, when the deficit was the lowest in nearly a year. The market consensus currently assumes it will grow to 65 billion USD in October.

Half an hour later, the Conference Board will publish customer confidence index for the USA. Last month, it significantly rose above expectations to the highest level in 17 years (125.9 pts. vs. 121). This index may decrease slightly this month (market expectations indicate a reading of 124 points).

In the case of the dollar, the fate of the tax reform project draft currently has the most significant impact on the dollar. Therefore, the impact of the aforementioned data on quotations seems to be limited, unless both publications prove to be much worse than expected, then we may have to deal with a slightly weaker dollar.

 

27 Nov 2017 15:10|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:

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Daily analysis 27.11.2017

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Afternoon analysis 24.11.2017

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