Daily analysis 02.10.2017

The US currency is clearly gaining in value through prospects of monetary tightening, tax system reform and taking advantage of a weaker euro. The dollar's appreciation is once again not in favour of the zloty, despite a better than expected manufacturing PMI index.

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

• 4.00 p.m.: ISM Manufacturing Index in the US (estimate: 58.0 points).

The EUR/USD pair close to 1.17

Today, the euro was under particular pressure made by the Catalan referendum and the probable declaration of independence this week (October 6th, according to Bloomberg). At the same time, we observed a clear appreciation of the dollar accompanied by an increase in US Treasury bond yields - as those that will be maturing in 2-years exceeded 1.5%.

As a result, the exchange rate of the main currency pair, i.e. the EUR/USD has depreciated to approximately 1.173, while Friday's close was above 1.18. The stronger dollar evoked clear pressure on the GBP/USD pair. The pound, in relation to the US currency, was the cheapest in just over two weeks and the rate of this pair fell to 1.330, although 10 days ago it was at approximately 1.36.

The macroeconomic data also won’t help the pound

Macroeconomic data will also be unhelpful. The industry PMI index in September was at 55.9 pts and turned out to be 0.5 pts below expectations. Last month's data was also revised downward by 0.2 pts.

The arguments may be in favour of the further dollar's appreciation in relation to the euro - which has been under the local pressure (hawkish Fed - higher probability of rate hikes, tax reform).

The most important event of this week, however, is Friday's report on the US labour market. It will probably have the greatest impact on the dollar's trading this week and may enlarge its strengthening trend if the data on wages surprises positively.

Even in the afternoon today, a slightly higher volatility of the dollar in the quotations can be observed. At 4 p.m., September's ISM index for the industrial sector in the US will be published. In August, it rose to its highest level in almost three years (58.8 points). Market consensus points to a slight decrease to 58.0 pts - a reading slightly above expectations could withhold the dollar's appreciation trend, which has been observed since the beginning of the Asian session.

Stronger dollar didn’t favour the zloty

IHS Markit published positive data on the Polish industry today. This sector's PMI in September rose to 53.7 pts (0.5 pts above expectations) to the highest level since April this year. The report states that this growth was mainly due to the fastest increase in new orders in 2.5 years. On the other hand, the rising inflation pace of production costs (mainly steel prices) caused prices of products to increase at their highest level since April 2011.

Despite this generally favourable and better than expected data, the zloty was not able to gain value. As we have seen in recent months, the dollar's appreciation and increase in bond yields have resulted in a capital outflow from emerging countries, which have put pressure on the zloty. The USD/PLN increased to approximately 3.68 today, which is close to the two months highs from last Thursday (approx. 3.696). The US currency should strengthen further in the afternoon, which could occur if the ISM index reading beats expectations. This would probably result in the dollar's price exceeding 3.70 PLN for the first time since July 14th.