Attention focused on Fed (Daily analysis 21.02.2018)

The eurozone's PMI did not fulfil expectations, but remained at relatively high levels continuously. The pound was under pressure from continued negative real wages in the UK. The zloty lost in relation to the euro due to negative external signals, but the Polish currency in relation to the Hungarian forint remained close to two-year highs.

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

• 8:00 p.m.: publication of records from the recent Federal Reserve meeting.

Worse sentiment

For the time being, the European session is influenced by a rather weak mood. Perhaps this is the result of yesterday's US quotations, where the main index declines were between 0.5% and 1%. It is possible that the lack of optimism may be caused by a slightly worse situation in the eurozone's economy.

The PMI indexes for Germany, France and the eurozone published in the morning were below expectations and below January's readings. This concerned both industry and services. Of course, results close to a range of 56-57 points are still historically high, but decreases of about 1-1.5 points may suggest a slight slowdown in this exceptionally good economic situation seen at the beginning of the year.

In the comments regarding the data, IHS Markit economist head Chris Williamson pointed out that the first two months of 2018 suggest the development of the eurozone (Germany, too) at a level of 0.9% per quarter in Q1. Apart from the slowdown of main indexes to 2-4 month lows, employment growth is still close to many year highs and optimism over the situation for the next 12 months has remained at its highest levels since 2012.

Despite the fact that the data was only slightly worse than estimates, it probably contributed to the negative sentiment in the markets. Investors may also be afraid of today's "minutes" from the most recent Federal Reserve meeting.

The first Fed meeting took place just before the market's collapse at the beginning of February, therefore that is the reason for provoking comments on the need to accelerate the tightening of the monetary policy (due to the optimism in the capital market and in the real economy). This could help the dollar this evening if these speculations were confirmed in the Federal Reserve's publication.

Slightly weaker pound

Today, information was published that surprised the market in the UK. For the first time in 18 months the unemployment rate increased. However, this increase was symbolic (by 0.1 percentage points to 4.4%) and probably resulted from the fact that some of the professionally inactive (their number dropped) started to look for a job, and not all of them have found a job on the market.

On the other hand, a much more serious problem is the fact that wages on the Islands have not followed inflation. In real terms, wages are falling by 0.3% year-on-year, which may translate into weaker results (for example in the case of consumption). In the morning, the pound was also under pressure from the average global sentiment, which is not positive.

Apart from the labour market situation and external signals, the issue of Brexit is still in the limelight. Conservative party representatives amounting to 62, officially demand a "clean Brexit" from Prime Minister Theresa May. This may have a negative impact on the sterling until next week's speech from May, which will, in part, be devoted to the departure from the EU.

Slight zloty depreciation

The EUR/PLN quotations moved to the 4.15-4.16 boundary around midday. The slight zloty weakening is related to a slightly worse global sentiment (drops on market, a stronger dollar).Generally, the zloty's condition in the region is not bad, and in relation to the forint, it remained very close to two-year highs.

Investors may be afraid of today's Fed message. It is possible that it will be much more hawkish and may suggest a slightly faster tightening of the monetary policy by the Fed than expected. Such a transfer could lead to an increase in the yield of the US Treasury bonds and drops on the market. This would probably also be a negative signal for the zloty, especially in relation to the dollar. In the case of a combination of weak sentiment and hawkish minutes, the dollar could move above the 3.40 PLN level.