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Agreement "is close". Dollar slightly weaker (Daily analysis 15.11.2019)

15 Nov 2019 13:32|Bartosz Grejner

The US President's economic advisor confirms that they are in everyday contact with the Chinese authorities and are close to an agreement. The euro is slightly stronger after positive signals from the eurozone. Persistent good sentiment on the equity market and lack of dollar appreciation contribute to the stabilisation of the zloty. In the afternoon, retail and industrial data from the USA will be published, and they can show the current condition of the US consumers.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

  • 2:30 p.m.: Retail sales in the USA in October (estimates: 0.2% month-to-month, 0.4% of month-to-month excluding vehicles).
  • 3:15 p.m.: Industrial production in the USA in October (estimates: - 0.4% month-on-month).

EUR/USD moves away from 1.1000

International trade and negotiations between the US and China continue to be the most important issue for the market. Market participants await new information that could indicate whether, when, and in what form an agreement between the powers will be concluded. Almost every day there is news coming. It was no different today.

Larry Kudlow, the US President's economic advisor, signalled late in the evening that the first phase of the agreement was "close". This introduced some positive sentiment in the market, which translated into a higher appetite for risk and growth of the main indexes in the first trading hours. As the hours went by, the market indexes gradually returned their morning profits. Around midday, most of them were close to the levels of yesterday's closing.

The market becomes more and more resistant to similar signals of improved negotiations between China and the USA, which are coming in almost every day. Therefore, the impact of communications that do not contain many details is of limited importance. Today is also the fifth week after the Chinese delegation's visit to Washington. At that time, too, President Donald Trump said that an agreement was a matter of weeks. The lack of any positive details in the coming weeks may, in turn, slightly worsen sentiment in the market, as investors may increase their fears that it is more difficult to reach an agreement than both sides communicate in brief statements for the media.

The EUR/USD pair is being traded in a relatively narrow range, but the euro has been appreciating since yesterday afternoon. After reaching its lowest level in a month (around 1.0990), the main currency pair increased today to around 1.1034. The single currency may be slightly stronger due to positive information from the eurozone this week, including a higher ZEW sentiment index, exceeded expectations regarding the growth pace of German GDP and the eurozone as a whole. These were not breakthrough data in the case of view of the economic slowdown, but they may suggest that the most crucial point of the slowdown is behind us.

Zloty benefits from current global economic situation

The slight weakening of the dollar accompanied by continued relatively good sentiment on the global equity market is good news for the zloty. The Polish currency basket is slightly stronger than yesterday. The EUR/PLN exchange rate, after reaching yesterday about 4.2975 (the highest level in nearly a month), fell again today to about 4.28, and the USD/PLN pair fell from about 3.91 to 3.88. Today's data from the USA on retail sales and industrial production will be important for the dollar and the zloty. Confirmation of the good condition of the US consumers and greater activity in industry than expected may bring EUR/USD back to the 1.1000 boundary. This could mean a weakening of the zloty's basket and a return of EUR/PLN to the 4.30 level and USD/PLN to around 3.90. The zloty's depreciation is unlikely to happen unless some new information on international trade is received.

15 Nov 2019 13:32|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:

8 Nov 2019 15:36

Dollar is getting stronger, stable zloty (Afternoon analysis 8.11.2019)

8 Nov 2019 12:54

Interview that introduced uncertainty around trade (Daily analysis 8.11.2019)

5 Nov 2019 13:43

Chances for a broader agreement between China and the USA (Daily analysis 5.11.2019)

4 Nov 2019 13:32

Positive sentiment puts data in the shade (Daily analysis 4.11.2019)

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