Daily analysis 18.01.2018

The yields on the US Treasury bonds are increasing. Data from China and Fed representative statements without any significant impact on currency quotations. The zloty remained stable and was close to 4.17 EUR.

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

• 2:30 p.m.: Weekly data on initial jobless claims in the USA (estimates: 249k),
• 2:30 p.m.: New investments in the US real estate sector and building permits in December (estimates: 1.28 million and 1.30 million respectively; annualised data).

Bond impact on currencies still limited

The second part of yesterday's US session was interesting and clearly showed the current relations between debt instruments, shares and currency markets. In the late afternoon (CET), indexes on New York's market significantly accelerated in the case of growth and began to move towards historical highs.

At the beginning, increases on the market have weakened the dollar as at the same time Treasury bond yields have not increased. This was an argument for the dollar depreciation, which was probably caused by the outflow of some capital outside the US currency market.

Just after 8:00 p.m., the yield of the US Treasury bonds started to increase as the stock market grew stronger, suggesting a higher chance of tightening monetary policy in the following months. This caused a drop in the EUR/USD quotation from around 1.2280 to about 100 pips below.

Yesterday, the trends observed for the past few weeks were confirmed by market behaviour. The lack of a reaction to share increases on interest rates or debt markets (theoretically, there should have been one), causes the dollar to lose value. However, when such a reaction occurs (growing yields) then the correlation returns between the growing market valuation of future interest rates and the dollar.

The current features of good sentiment and the still accommodative monetary policy approach do not help the dollar. However, if this situation reverses (worse sentiment combined with maintaining the pace of monetary tightening), it may be really negative information for the emerging market currencies. They may lose support from the favourable economic situation in the US and, at the same time, may suffer from the perspective of tightening monetary policy by the Fed.

China and statements from Fed representatives

In the morning, the market received data from the Chinese economy. It was in line with expectations. The GDP growth for the whole of 2017 exceeded the economist expectations by 0.1 percentage points and amounted to 6.9%. A rapid increase in retail sales (9.2% YOY) and industrial production (6.2% YOY in December) translates into GDP growth.