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Daily analysis 09.01.2018

9 Jan 2018 12:44|Marcin Lipka

The EUR/USD depreciation deepened. Will the market begin to believe in the relatively hawkish Fed and the maintenance of a dovish attitude by the ECB? The zloty leads in falls. It lost the most among both developed and emerging market currencies. The EUR/PLN tested the 4.18 PLN area and the dollar reached 3.50 PLN.

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

  • No macro data that clearly influences the analysed currency pairs.

Good data from the eurozone. EUR/USD continued to depreciate.

In the morning, the dollar rose significantly. The EUR/USD has been falling noticeably below the 1.1950 level. Better than expected data from the eurozone has become secondary and signals from the debt instrument market were in the foreground. This is due to US Treasury bond yields that will be maturing in 10 years rising to 2.5% as well as the spread between the US and German instruments having the same maturity widening.

Data from Germany can be mainly considered positive in the case of eurozone readings. Industrial production in Germany grew by 5.6% in November. This is almost 2 percent more than the market consensus had indicated and is the highest value in over 6 years. Destatis data also showed an approximate 7% increase in the capital goods production, which may suggest an increase in enterprises spendings.

Data on German foreign trade is also positive. Exports and imports are increasing at a level of over 8% year-on-year and trade surplus amounted to 23.7 billion EUR in November. IT is over 2 billion more than the consensus. With the appreciating euro on the global market, it may be assumed that the German economy is still competitive.

November's data on the unemployment rate of the eurozone as a whole was published today. As expected, it fell by 0.1 pts to 8.7%. The result is still high even though it fell to the lowest level since 2009. The lowest percentage of jobseekers in the EU are in the Czech Republic (2.5%) and Germany (3.6%). Poland ended up at seventh place with the result of 4.5% (seasonally adjusted).

Positive data from the eurozone did not prevent the EUR/USD from depreciation or an increase in German government bond yields. Therefore, the investors still don’t believe in a quick exit from the ECB's ultra mild monetary policy.

In the USA, yields of 10-year Treasury bonds have in turn exceeded the 2.5% level during Europe’s morning trade. The spread on Treasury bond yields maturing in 10 years expanded to 207 basis points. By the end of the year, the market already calculated over 2.5 percent in interest rates increases by 0.25 percentage points each (66 basis points) by the Fed.

Growing expectations for future interest rates and a lack of similar movements in the eurozone caused EUR/USD falls. Friday's US inflation data will be crucial for the main currency pair. If core prices increase faster than 1.8% year-on-year, then the downward pressure on EUR/USD may remain, especially as inflationary processes in the eurozone are extremely suppressed.

Zloty under pressure

As the zloty was clearly appreciating during EUR/USD increases and as US government bond yields remained low, it is currently depreciating greatly. The Polish currency is the weakest among 31 emerging currencies in developing countries in relation to Friday's closure. The zloty lost 1.5% to the dollar and 0.6% to the euro. The Czech crown and the Hungarian forint lost 0.4% and 0.6% less than the zloty, respectively.

Part of Latin American and Asian currencies have barely weakened. This suggests that the current depreciation of the zloty isn’t a result of sales of all emerging markets, which should stabilise the zloty. On the other hand, a strong rebound of previous changes shows that the Polish currency is still very sensitive to even relatively small changes in global sentiment.

As noticed in previous days, the US government bond's behaviour will be crucial. Friday's inflation data from the US will be as well. If it turns out that the US inflationary processes are accelerating, the pressure on the zloty could increase (especially in relation to the dollar).

9 Jan 2018 12:44|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

8 Jan 2018 15:11

Afternoon analysis 08.01.2018

8 Jan 2018 12:24

Daily analysis 08.01.2018

5 Jan 2018 15:38

Afternoon analysis 05.01.2018

5 Jan 2018 12:26

Daily analysis 05.01.2018

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