Daily analysis 19.07.2017

The dollar has been recovering some of its losses, but the market is clearly waiting for the ECB's meeting tomorrow. The pound remains relatively weak before the retail sales' readings. The solid growth of wages in the Polish economy. An important publication of the Polish Central Statistical Office (GUS) on the industrial production and the retail sales. The zloty slightly loses its value. The USD/PLN pair tests the area around 3.65.

Macro key data (CET time- Central-European). Estimates of macro data are based on information from Bloomberg unless marked otherwise.

• 2.00 p.m.: Industrial, building construction and assembly production in Poland (estimates: + 3.9% YOY and + 9.8% YOY respectively)
• 2.00 p.m.: Retail sales infrom Poland (estimates: + 6.8% YOY)
• 2.30 p.m.: The US homebuilding permits and housing startsinvestment commenced (estimates: 1.2 million dollars and 1.16 million dollars respectively)

The market is waiting Expectancy

Since reaching the 1.1580 level yesterday evening, yesterday evening EUR/USD has reached the 1.1580 level, the main currency pair (EUR/USD) has been slowly losing the value. At the beginning of the European session, even the 1.1520 boundaryborder was tested. However, some support for the euro was provided bycould provide the a Bloomberg news.

The agency's information, citing the anonymous sources insideat the ECB, claimeds that the central bank wasis analysing scenarios for the autumn's quantitative release decision. On the one hand, it may mean that tomorrow's meeting should be relatively neutral (negative information for the euro), but on the otherat the second, Mario Draghi's press conference may reveal that discussions on QE taperingshut down have already been on the table. Consequently, the statementmessage itself is unlikely to be changed, but the ECB President's Questions & Answers session may reduce the downward pressure on the euro.

As a result, the ECB may have problems with slowing down theits current growth pressure on the euro, despiteeven if the euro beingis at its highest levels since end of 2014 in relation to the basket of countries’ currencies that trade with the eurozone in the currencies' basket traded in the eurozone since the end of 2014. It’s less than 5 percent appreciation since the mid-April may be an obstacle to achieving thethe achievement of the inflation target and may stimulate imports too muchincrease too many imports' stimulation, while could also adversely affecting the GDP growth.

On the other hand, after the lower than expected inflation data from the UK, the pound is unable to make up for recent losses (especially to a slightly stronger dollar). On Monday, the market valued the probability of the BoE increase of interest rate hike by 25 basis points to 50 percent, and today it is less than 40 percent. If tomorrow's retail sales in the UK missed expectationsfailed, more losses on the sterling could be expected.

A The weaker dollar helps other currencies

During the course ofFor the last week, the dollar lost about 1 percent to the euro. However, despite the relative strength of the European currency, many currencies of the emerging countries also appreciated in relation to the euro. The South African rand or South Korean won strengthened to the euro by about 1.5 percent. The Brazilian real, Mexican peso, Russian ruble and Polish zloty gained approx. 0.5%.value increased by about 0,5%More powerful of about half a percent is the real Brazilian, the Mexican peso, the Russian ruble or the Polish zloty.

On the one hand, the strong position of commodity currencies (higher valuation of oil and some industrial metals) and still relatively optimistic signals for the global economy (better condition of MXN, PLN or KRW) are good. It is worth noting, however, that these movements would be very difficult to achieve without the clear depreciation pressure on the US currency and the diminishing chances of the further monetary tightening policy in the US. If this trend reverses then the positive sentiment towards the EM currenciesy could get worse fairly quickly and not only in relation to the dollar but also to the euro.

Slight correction on the zloty

Since the beginning of today's session, the zloty has been losing some value. This may be partly the result of the slightly stronger dollar and partly a correction of the last appreciation. In general, however, the PLN situation is still favourable due to the good sentiment towards EM currencies (more in the preceding paragraphs), as well as the growing chances to start a more serious discussion on the interest rate rises in Poland (June's salary increase was 6% YOY).

This afternoon, the market’sour attention will be focused on June's data from the domestic economy. Due to one working day less than in the previous year, the industrial production output growth may be relatively low (consensus + 3.9% YOY vs. May + 9.1% YOY). The retail sales should be less exposed to working days and will probably increased by approx. be close to the 7% YOY, i.a. due to the strong wage growth.

However, At the risk of considerable surprise, construction and assembly production is exposed to a risk of a considerable surprise. The market consensus points toward an increase of consensus has reached 9.8% YOY, but the estimates rangeis between 6.0% and 13.6%. Taking into account the still limited inflow of the EU funds and the fact that there were fewer working days are ahead, we can expect lower than expected data than Bloomberg's median estimate. In general, however, this data should not have a major impact on the zloty and the correction on the gold, even in slightly weaker readings, should not dramatically increase. - a potential correction movement shouldn’t increase even in the case of slightly weaker than expected readings.