The lack of meaningful macroeconomic data contributed to a relatively stable performance of the main currencies on Monday. Tuesday also does not foreshadow any major changes - those we can potentially expect from Wednesday.
EUR/USD at approx. 1.14
The beginning of the week on the currency market begins calmly. The main currency pair, i.e. the EUR/USD, traded around 1.14 with a limited volatility range. The broad market was dominated by positive sentiment - the increases during the Asian session also translated into growth of the main European stock indices. This sentiment is not likely to change significantly given the lack of important macroeconomic publications planned later in the day.
The zloty lost today in relation to the main currencies, although these were not significant changes. Looking at the quotations from previous days it can be seen that today's slight weakening is only a response to the recent increases in value. The EUR/PLN exchange rate was slightly above 4.30, while the USD/PLN exchange rate was around 3.77, while the franc was close to 3.79.
In the absence of significant publications, much will depend on the US stock market and the behaviour of the lira. US headline index futures and positive sentiment in Europe indicate that the likelihood of a significant decline in index futures in the evening is limited.
Lira is losing 2% of the dollar today, but looking back on the previous days, the losses are relatively small. The situation in Turkey is far from stabilising, so a rapid improvement in the condition of the lira is not to be expected. At present, the Turkish currency is trying to find a balance, which could also be disturbed by the statements of Turkish officials. In the event of a sell-off of the lira, capital outflows from emerging countries' currencies may occur, which may also exert pressure on the zloty.
Just like today, the calendar of events planned for tomorrow is practically empty. Therefore, the quotations on the foreign exchange market, as they are today, will most probably be the result of the condition of the euro, the dollar and the lira, as well as the behaviour of the Italian debt and the situation on the global stock market.
Important publications, which may have an impact on the currency market, will start to appear from the middle of the week. On Wednesday, we will see a record of the last meeting of the Federal Reserve and on Thursday and of the European Central Bank as well. Preliminary data on PMI indicators for the euro area will also be published on the same day.
The symposium in Jackson Hole, which will also begin on Thursday, must also be taken into account. Representatives of the world's largest central banks will speak there, which may increase the range of fluctuations on the market. In the light of these publications and developments, it appears that the slowdown in the growth rate of the euro area economy could put pressure on the single currency later in the week.