Daily analysis 05.10.2017

The pound under pressure - it has already lost approximately 3% in relation to the dollar over the past two weeks. The EUR/USD quotations are stable, however, significant fluctuations can be expected tomorrow. The zloty had no major changes after yesterday's Polish MPC conference. Nevertheless, its dovish statement may harm the Polish currency in long run.

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

• 1.30 p.m.: Publication of the discussion's records at the last European Central Bank monetary committee meeting.

The euro and the dollar are stable, the pound depreciates

Yesterday's speech by both the President of the Federal Reserve (Janet Yellen) and the President of the European Central Bank (Mario Draghi) did not bring unexpected statements and quotations of both the euro and dollar remained stable. The main currency pair, the EUR/USD, was still within a narrow range of 1.17-1.18.

In the latter half of the day (1.30 p.m.), a record of the talks (minutes) from the last monetary committee meeting will be published. This may cause more volatility on the euro's trading, although the chances of changing the current tendency appear to be limited. The single area currency's valuation decreased since the last meeting (from approx. 1.20 for the EUR/USD pair), which is likely to reduce the impact of potential concerns about a high exchange rate.

The euro could appreciate if there are new statements suggesting a time period for the beginning of the QE tapering. However, taking into account the signals received from the ECB members, chances for it are limited. Therefore, it’s most probable that Friday's report on the labour market will be the only report to trigger more significant changes in the valuation of the euro and the dollar. If it turned out to be in line, or even better than expected, the dollar could return to an appreciation path.

In contrast to the euro and the dollar, the pound has been clearly depreciating since the morning, continuing its downward trend. One pound cost less than 1.32 USD today, while two weeks ago it was worth 3% more. Today's depreciation increase could have been contributed by a statement from the Federation of German Industry (BDI), which stated that German companies in the UK had to be prepared for a “very hard Brexit.”

On one hand, the perspective of monetary tightening in the UK (connected with inflation close to 3%) may support the pound against a more significant depreciation, but on the other hand, the uncertainty of the Brexit process as well as the weakened position of PM Theresa May's cabinet are increasing anxiety, which may put further pressure on the British currency.

The Polish MPC without changes

In line with expectations, the Monetary Policy Council announced yesterday (after two days of meetings) that interest rates will remain unchanged. The statement and press conference did not bring any hawkish statements that could suggest earlier monetary tightening. The Council also expects that in the coming months, inflation will fall.

Adam Glapiński, President of the Polish MPC, also repeated his opinion that interest rates should remain unchanged until the end of 2018. Yesterday's press conference and his statement didn’t cause major changes in the zloty's valuation. However, the Council's dovish tone may harm the zloty in the case of further preparations beginning the monetary tightening in the eurozone.

Excluding the relation to the globally weaker pound (which lost approx. 0.5% against the zloty), the PLN’s trading against the main currencies remained close to yesterday's levels. However, this may change tomorrow. If data from the US labour market (especially regarding wages) had positively surprised and caused the US currency's appreciation, (given the dovish tone of the MPC) the zloty may have depreciated.