Continuation of the trade conflict (Daily analysis 17.09.2018)

The situation related to foreign trade continues to be important for the market, but a large number of unconfirmed information tones down investors' fear. The zloty remains stable. The euro exchange rate was within the range of 4.30 PLN around midday.

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.

Trade uncertainty

Trade during the Asian session did not indicate a particularly good sentiment on the European markets. The Shanghai Composite index closed its quotes on the lowest levels in 4 years. The Indian rupee (approaching historical lows records in relation to the dollar) and the Chinese yuan also lost value. Once again, the Turkish lira's quotations looked weak, which was returning temporarily to the levels from before the strong increase in interest rates last week.

Probably a significant number of problems are still caused by threats related to foreign trade. The slight optimism that emerged last week about the visit of Chinese officials to Washington has quickly evaporated. At least three sources (The Wall Street Journal, Bloomberg, and CNBC) reported that duties are likely to be imposed on China even today (CNBC).

However, the scenario presented by a series of articles in the WSJ seems to be more likely. "Trump's administration is planning to introduce customs duties on 200 billion USD worth goods imported from China in the next few days". However, these customs duties will not be at the level of 25%, as it was thought in August, but within the 10% limit. The WSJ estimates that this is the result of consultations with entrepreneurs, who have expressed concern about such high trade restrictions.

Customs duties may complicate the talks with Chinese at the end of the month. It is unclear whether a delegation from the Middle Kingdom will actually come to Washington if a new series of restrictions is announced. On the other hand, the cancellation of the visit is a further escalation of the conflict, in which the Chinese side loses much more than the US side. As a result, the most important information will be not so much the announcement of new duties, but China's reaction to these reports.

Stable zloty

Little is happening in the case of the zloty. The EUR/PLN quotations are at a level of 4.30. The zloty is also likely to wait for information on foreign trade, but if the global sentiment does not deteriorate dramatically, the impact of this information on the Polish currency exchange rate is likely to remain limited.

However, the franc is relatively expensive all the time. This is mainly due to external factors. The Swiss economy is growing surprisingly fast as for a slowdown in the eurozone (as much as 3.4% year-on-year in Q2), and at the same time the fear of disturbances in foreign trade makes Swiss capital cautious and probably invest less abroad, thus reducing the global supply of the franc. Thursday's SNB meeting will be interesting. If the central bank's approach to the issue of a strong CHF remains unchanged, a further strengthening of the franc can be expected, and a continuation of the upward trend of the franc in relation to its Polish counterpart.

Assuming that in the coming hours the market will not receive any dramatic information on customs duties (baseline scenario), the condition of the zloty should be relatively good. Additionally, before midday, there was a slight weakening of the dollar on the global market, so the external pressure on the zloty is moderate.