Afternoon analysis 28.08.2017

Today, the limited calendar of macroeconomic events has little impact on the currency market. The Polish currency was relatively stable - in the afternoon, it oscillated around Friday levels.

Dollar without major changes

After Friday's major dollar depreciation, its quotations during the session were relatively stable today. The range of fluctuations was very limited - due to both, the absence of significant macroeconomic publications and the Bank Holiday, which were mainly responsible for decreased investor activity.

Since 7 a.m., the EUR/USD pair was quoted in the narrow range of 1.192 - 1.194. The dollar index (DXY) behaved similarly, which moved between 92.3 and 92.5 points in those hours. July's Bureau of Economic Analysis (BEA) data on US trade balance also did not impose any actions on the dollar until 3 p.m.

The deficit in trade balance (seasonally adjusted) at 65.1 billion USD was worse than expected (64.5 billion USD) and the biggest in two months. In July, both export and import have decreased. The value of exported goods fell by 1.6 billion USD, while imports by 0.5 billion USD. The decline of the former was largely responsible for the lower exports of vehicles and consumer goods.

The worse than expected balance of trade in goods was another blow to the dollar, after the recent depreciation. Although the market reaction to the data was very limited, in the afternoon, it may be further weakened as US investors become more active. The potential for further US currency's depreciation seems limited, however, the market participants are likely to expect data from the US economy, which will begin to appear on Wednesday.

Zloty close to Friday's levels

Today, the Polish currency trading was relatively stable. After setting the new lows for the USD/PLN pair (approx. 3.555), this rate returned to around Friday's level (3.57). The EUR/PLN in turn, moved between 4.25 and 4.26, which was practically the same range that was observed during Friday's session.

The pound's, like the dollar's, relation to the zloty has set new lows today as well - the GBP/PLN pair was quoted at 4.588 this morning, which was the lowest exchange rate in over 6 years (with the exception of the flash crash in October). In the following trading hours, however, the pound began to consolidate and as a result, the GBP/PLN returned to 4.61, slightly above Friday's level.

In the second half of the day, the market sentiment has slightly improved - European stock indexes pared most of the losses, which led to a partial capital outflow from the franc. As a result, the Swiss currency erased some of today's profits and the CHF/PLN exchange rate fell from 3.75 to 3.736.

Today, the calendar of scheduled events is very limited, therefore, the possible changes in the zloty's trading will be relatively small. However, this is not a sign of calm trading this week- due to important macroeconomic publications, from Wednesday we expect an increase in the zloty's exchange rate fluctuations.

Tomorrow's preview

Macroeconomic data releases, scheduled this week, may have a significant impact on the currency market, especially on the dollar's trading. The most important publications will begin to appear on Wednesday - until then, the planned publications will likely have limited impact on the currency market.

Tomorrow at 8.00 a.m., the GfK Institute will publish the German consumer climate index for September. Starting in mid-2008, the consumer sentiment in Germany measured by this index has gradually increased to the highest level since November 2001 (10.8 points). Now, the median of market expectations points toward maintaining the aforementioned level in September, after five months of increases in this index in a row.

Other German indexes of consumer and financial market experts sentiment (sentix, ZEW Institute) pointed to slightly lower expectations due to, i.e. scandals in the car industry or upcoming elections. This may also translate into a slightly weaker reading of September's GfK index. Although in the case of worse than expected data, the euro may lose some of its value given its recent strong appreciation, the impact of GfK is likely to be limited due to the events of the following days.

In turn, at 4.00 p.m., Conference Board will present the US consumers' confidence index in August. Last month, it turned out to be much higher than expected (121.1 points vs. consensus of 116.5 points), which was close to the 16.5-year high of March of this year (124.9 points). Market consensus points to a slight drop in this index to 120.3 pts. Taking into account recent events in the US (including Charlottesville events and political factors), consumer sentiment may fall even below market expectations, which could further weaken the dollar.