Daily analysis 16.10.2017

Tensions in the Middle East did not worsen the market sentiment. The EUR/USD pair dropped below 1.18 boundary. The stabilisation on the zloty, however, the data on industrial production and retail sales, which we will be published on Wednesday, may have a significant impact on its quotations.

Key macro data (CET time - Central European). Estimates of macro data are based on Bloomberg data unless otherwise noted.

• No macro data that can clearly influence the analysed currency pairs.

A stronger dollar

Relatively worse than expected US consumer inflation data has led to an initial significant dollar's weakening on Friday. With the passing hours, the US currency has appreciated and in relation to the euro returned to the pre-publication levels around 8 p.m. The beginning of today's quotations even during the Asian session brought the further dollar's appreciation.

The main currency pair, the EUR/USD pair, fell below 1.18 level to around 1.178, the lowest level since last Tuesday. It should be noted, that the consensus in the Federal Reserve's monetary committee assumes one increase this year, and three more next year. Although the US inflation has not increased (which would raise the likelihood of rate hikes), the absence of its decline has not provoked a wider discussion about the appropriateness of rate hikes at such a pace.

The geopolitical tensions connected with the US nuclear agreement with Iran also did not influence the dollar much. So far, these issues have had a limited impact on the main currencies' quotation.

The following days may be important from the pound's perspective - tomorrow will be released September's inflation data and the next day data on British people wages. In addition, there is still an issue of the impasse with the European Union's negotiators over the bill that Britain would have to pay for Brexit.

According to the Bloomberg, today, PM Theresa May is going to travel to Brussels to help resolve this issue. If an agreement could be reached, the pound would appreciate. On Monday morning, its relationship with the dollar reminded close to Friday's level- one pound cost 1.33 USD. Given the aforementioned Brexit issue and planned publications in the following days, the pound's fluctuations may increase.

The zloty relatively stable

The stable situation on a currency market translated into a calm start of the week for the zloty. In relation to main currencies, the zloty reminded near Friday's closing levels. The aforementioned gradual dollar's appreciation did not bother the emerging countries' currencies, including the zloty.

Today's calendar of scheduled events is limited- around 2.00 p.m. the National Bank of Poland (NBP) will publish August's data on current account, however, its impact is probably limited and we will probably observe stabilisation around current levels in the following hours.

On Wednesday will be published September's data on industrial production and retail sales in the Polish economy and it may be more important. Given that September is the last month of the quarter, this data may give indications of GDP growth rate in the 3Q. If market expectations exceeded (5.2% growth in production and 7.9% growth in retail sales YOY) and the market sentiment was not worsened and the dollar did not rapidly appreciate, the zloty could continue to appreciate, and the EUR/PLN exchange rate could approach 4.22 - 4.23.