Calmer sentiment (Daily analysis 23.02.2018)

Sentiment has cooled down in the global market. Core inflation in the eurozone remained very low. The absence of significant impulses translated into the zloty paring a portion of its losses. The EUR/PLN pair returned around 4.1700 during the midday quotations.

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

• A lack of macro data may noticeably impact the analyzed currency pairs.

Calm situation

Over the last few days, signals regarding the dollar that were more positive than negative were observed. This is visible in EUR/USD depreciation from 1.2400 to 1.2300 this week. However, this is an insufficient movement to build an argument about reversing a negative trend for the dollar. For this to happen, a further increase US government bond yields combined with a rather sceptical approach to the market by US investors is needed.

On the other hand, the last hours of the US session have been rather negative (the increases were not maintained), but the first hours of trade in Europe are neutral. Therefore, the EUR/USD pair pared some losses from the Asian session.

According to macroeconomic readings, Destatis confirmed the preliminary GDP readings for Germany in Q4 (2.9% year-on-year seasonally-adjusted). The growth components are solid with a balanced impact from investment and consumption. Net exports also contributed positively (at 0.8 percent), but it is practically impossible to maintain such a contribution from the trade balance in the long term.

In the morning, Eurostat published January's inflation data. In core terms (excluding fuels, food and stimulants) it amounted to 1.0% year-on-year, which seems to be a result that is too low result to maintain the ECB's statement. This may have a negative impact on the euro, especially when global sentiment is deteriorating.

The main currency pair's fate will depend mainly on changes in the US Treasury bonds and the market in the following. So far, nervousness is not observed, which may suggest that this closing will be close to current levels.

Paring losses

Cooling down the sentiment on the foreign market and slight declines in yields on the US Treasury bond reduce the zloty's losses. The EUR/PLN pair was approaching 4.19 yesterday. Today it is close to 4.17. The dollar also returned below the 3.40 level.

The next hours should be calm for the zloty. Speeches by US monetary authorities (Dudley with Rosengren on the Fed's balance sheet and Williams on the economic forecast) are scheduled, but it seems that references to the monetary policy before the Fed's meeting (back of March) will be balanced. The date of the meeting is approaching (approx. two weeks before), which is likely the only time that the FOMC members' statements can be more determined and oriented towards market orientation before March's decisions.