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Daily analysis 22.11.2017

22 Nov 2017 13:03|Marcin Lipka

The EUR/USD pair is again close to the 1.1750 boundary. The historical records on the US trading market. The strong volatility of the Swedish and Norwegian crowns. The zloty benefits from good sentiment in relation to most emerging currencies. The EUR/PLN pair close to the 4.22 level. Interesting comments from Kamil Zubelewicz, member of the Polish MPC.

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

  • 2:30 p.m.: Durable goods orders in the US (estimates: 0.3% MOM excluding means of transport 0.5% MOM),
  • 2:30 p.m.: Weekly data on initial jobless claims in the US (estimates: 240k),
  • 8:00 p.m.:"Minutes" from November's Federal Reserve meeting.

Good sentiment on the global markets

Yesterday afternoon a noticeable improvement in the global sentiment was observed. Shortly after the opening, the US indexes started to grow strongly, reaching new historical records. S&P 500 completed trading close to 2600 points. The New York stock market has gained over 11% since the beginning of the year.

Positive sentiment was also observed in Asia, where Hong Kong's stock was growing and emerging markets currencies (the Korean won, the Malaysian ringgit) were more than half a percent higher, setting the strongest levels to the dollar for over a year. It is hard to say clearly what contributed to such a sudden improvement of sentiment, but it is not excluded that a very moderate reaction of the events in Germany was perceived by investors as a "green light" for maintenance of the previous trends.

On the other hand, Janet Yellen's statements at the NYU Stern School of Business conference had a limited influence. The speech by the President of the Fed (without an official text) did not contain any breakthrough suggestions and was rather carried out in a loose atmosphere. Moreover, Yellen's future suggestions may have less and less influence on the market as her term of office expires already in February. In addition, on Monday the Federal Reserve officially announced that Yellen would also not be a member of the Board of Governors, which means that she would not have any influence on US monetary policy.

However, in the evening the publication of minutes from the Federal Reserve will be published. The dollar does not have to react strongly to them, but it will be interesting how Fed members assess inflation prospects for subsequent quarters and whether there is a clear advantage of supporters of rate hikes in 2018.

Strong fluctuations of the Norwegian and Swedish crowns

In recent days, strong fluctuations in the Swedish (SEK) and the Norwegian (NOK) crowns have been observed. This is due to a combination of global information, central bank policies and possibly increased the activity of portfolio investors.

The Swedish monetary authorities are trying to run a monetary policy close to that of the ECB. However, it is possible that due to a significant slowdown in the growing trend in the real estate market, interest rates in Sweden may remain negative for longer than in the eurozone. This makes it attractive for some investors to use carry trade strategies, which assume borrowing funds in low-interest currencies and looking for developing markets where expected returns are higher. In the short term, this creates downward pressure on the currency of a developed country.

The situation is slightly different in Norway. Norges Bank is also adapting its monetary policy to that of other central banks (ECB, Riksbank), but it also has to deal with the relatively low oil prices at all times. Longer than previously expected stimulation of the economy with low-interest rates allows it to significantly decrease core inflation (to around 1.0% YOY in the last three months), no pressure on wage growth and, as in Sweden, to significantly slow down the upward trend in real estate prices. It seems, therefore, that the movements on NOK or SEK may still be significant, and the pressure on these currencies may persist, especially if the real estate market slowdown worsens in the coming months.

Zloty supported by the global factors

New records on the US markets, with no increase in the yields of the US Treasury bond and the deepening appreciation of many Asian currencies of developing countries are helping the zloty. The EUR/PLN pair has moved to the range of 4.21-4.22, which are the lowest levels since July. Close to the lowest levels since the second half of January 2015 is also the franc, whose quotations are close to the 3.62 PLN limit.

Apart from global factors, the discussion within the MPC also seems to be more interesting. “I have no doubt the MPC’s tolerance toward inflation is quite high, and definitely much higher than mine", said Kamil Zubelewicz, a member of the MPC. A representative of the national monetary authorities also stated that he does not see the balanced economy clearly where weaker economic growth, slowing investment and rising prices are expected.

The increasing difference in the views of the MPC individual may cause intense discussion on monetary tightening from the beginning of the year. Although it is unlikely that interest rates will increase before the end of the first half of next year, the Council's twisting towards a more hawkish direction should help the zloty.


22 Nov 2017 13:03|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

21 Nov 2017 15:11

Afternoon analysis 21.11.2017

21 Nov 2017 12:21

Daily analysis 21.11.2017

20 Nov 2017 15:05

Afternoon analysis 20.11.2017

20 Nov 2017 12:06

Daily analysis 20.11.2017

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