Daily analysis 20.10.2017

The US dollar and the stock market are supported by a closer perspective of lower taxes. Less pressure was put on the pound after the German Chancellor statement. The zloty lost in relation to the main currencies, but the likelihood of a higher depreciation is rather limited.

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.

Stronger euro and dollar

On Friday morning, sentiment in the market was slightly better due to the Republicans' vote in the Senate on the budget programme for 2018. It may open the way to the tax system reform of Donald Trump without the Democrats' support. As a result, the value of future contracts for market indexes appreciated already at night and the main European stock markets opened with profit. The reform reducing taxes would also be positive for companies, and therefore a closer perspective of its introduction may support the markets.

The result of the Republicans vote at night was the strengthening of the dollar, as the tax system reform increases the probability of monetary tightening (due to increased inflationary pressure). The EUR/USD quotations fell from 1.1850 to 1.18 boundary, while the USD/JPY pair rose to the highest level in nearly two and a half months - one dollar cost even 113.5 yen.

The increased appetite for risk has affected the depreciation of assets considered to be safe havens, including the aforementioned yen, gold or the Swiss franc which incurred losses. In relation to the euro, the franc was worth at least as from mid-January 2015 - the EUR/CHF exchange rate rose again above 1.16.

The British currency was also in better shape today. At the EU leaders summit in Brussels, Angela Merkel, the German Chancellor said that it is up to both sides (the EU and the UK) to agree on a Brexit issue. As a result, this meant moderating the position previously expressed by EU negotiators. Taking into account the practically empty calendar scheduled macroeconomic events in subsequent hours, a significant change in the current sentiment (and therefore the valuation of major currencies) is rather limited.

Zloty slightly weaker

The better sentiment in the market and the aforementioned franc's weakening caused the CHF/PLN pair set new lows from mid-January 2015, falling down to the approx. 3.64 level, during the Asian session. In the following hours, however, the zloty gradually gave up part of its profits and the Swiss currency unit cost 3.66 PLN, i.e. similarly to the end of the day yesterday.

The dollar's appreciation caused the USD/PLN pair to rise to almost the 3.60 boundary, near yesterday's highs, while the GBP/PLN pair, after yesterday's drop to more than a month's lows gained about 0.6%. Today, one EUR cast over 4.24 PLN. The zloty also lost approx. 0.1% in relation to the local forint.

However, the probability of significant changes in zloty valuation seem to be rather limited today. The continuing strong sentiment and the recent relatively good macroeconomic data from Poland may further support the Polish currency valuation.