Daily analysis 17.11.2017

Today, a slightly worse sentiment weighed on the dollar and helped the yen and Swiss franc. A surplus in the eurozone’s current account surprised positively in September thanks to a significant increase in exports. The zloty saw little change as earnings data is due to be released later today.

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

• 2:30 p.m.: Average monthly earnings in the Polish corporate sector in October (estimate: +6.5% year-on-year),
• 2:30 p.m.: Employment growth in the Polish corporate sector in October (estimate: +4.5% year-on-year).

EUR/USD still revolving around 1.18

Yesterday evening, the US House of Representatives passed the tax bill project, which includes corporate tax cuts next year. That’s a step closer to implementing historic tax changes, however, the Senate needs to pass the bill as well (the vote will probably be held after Thanksgiving next week.)

Republicans need 50 out of 52 votes in order for the bill to pass in the Senate (the Congress needs to then merge it with the House bill and the package would be then sent to the US President). Ron Johnson, a Republican Senator from Wisconsin, opposed the project firmly, stating that it favours corporations over smaller entities. However, after a Wednesday night phone call with Donald Trump, he said he wanted to “vote for it” and was “optimistic that his concerns could be addressed.”

Recurring problems with tax reform introductions have been increasing the level of uncertainty, which has also been reflecting on the dollar. Although after yesterday’s vote in the House, the market sentiment was visibly better. As the US main indices finished the day approx. 1% higher and the euro stayed below 1.18 USD, the Asian session brought another wave of the dollar’s weakness.

The sentiment in the market at the start of the European session was slightly worse and a higher risk aversion could be observed. The main European indices fell below yesterday’s levels and assets like the Swiss franc, the yen and gold, known as “safe havens”, gained in value. The dollar was also lower in relation to other major currencies – the EUR/USD pair was once again up to approx. 1.18. The dollar index (DXY) was down approx. 0.3% to 93.5 points.

The European Central Bank (ECB) published September’s current account data for the eurozone at 10 a.m. A surplus of 37.8 billion euro came in significantly above market expectations (7.5 billion euro lower); it was also the third consecutive month in which the surplus grew. The increase was mostly due to the higher export of goods – it exceeded the August export by 6.4 billion euro.

The current account data usually didn’t have any significant impact on the euro. However, taking into account the relatively weak dollar and a reading markedly above the median of expectations, it could support the euro area’s currency and help the EUR/USD pair stay around the 1.18 level. The calendar of planned publications later for the day is nearly empty, so the volatility in the currency market will probably be limited. However, should the market sentiment improve, we could observe a gradual weaker franc and jen, which could also help the dollar move slightly higher.

Zloty was stable

Despite a slightly worse sentiment today, the Polish currency changed very little. The EUR/PLN pair was close to 4.24, only marginally above yesterday’s level, and the PLN/HUF remained unchanged. On the other hand, the CHF/PLN set new record lows (prior lows were mid-January 2015 in early trade) however, rebounded to 3.63 in later hours due to a globally stronger Swiss franc.

The Polish Central Statistical Office will publish earnings and employment data from the corporate sector in October at 2 p.m. The average monthly earnings probably increased by approx. 6% year-on-year for the third month in a row and employment will probably see an increase in the range of 4.5% - 4.6% (the median of market expectations points toward a 6.5% growth in earnings and 4.5% in employment).

The data will likely have only a limited impact on the zloty. An increase in earnings exceeding 6.6% (above August’s 5.5-year record) could suggest a higher pressure on inflation and, in effect, might strengthen the zloty.