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Daily analysis 24.11.2017

24 Nov 2017 12:53|Marcin Lipka

The growing probability of the political situation in Germany combined with a historically high reading of the Ifo index support the already strong euro in the past few days. The zloty remained stable in relation to the main currencies, but its condition in the region is deteriorating. The EUR/PLN close to the 4.21 level.

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

  • No macro data that can clearly influence the analysed currency pairs.

More positive information for the euro

The absence of Thursday's session in the US and the quiet quotation course in Asia caused the European trading of the EUR/USD to open close to yesterday's closing, near the 1.1850 level. However, the main currency pair started to reach higher and higher levels in the following hours.

The EUR/USD appreciation was caused, on the one hand, by reports of increasing chances of stabilisation of the political situation in Germany and, on the other hand, by record high investor confidence index readings of the Ifo. Financial Times in its online edition writes that after an 8-hour meeting of the SPD leaders, the party is ready to start talks with Angela Merkel regarding re-cooperation.

Positive sentiment on the euro supported new highs on the Ifo index. The German sentix economic index rose to the highest level ever (117.5 points) and exceeded the estimates of economists surveyed by Bloomberg by 0.8 points. It is also worth noting that the component of the future confidence index has significantly increased and led the main reading to reach to the highest value since the German reunification.

In the case of selections to different sectors, it is also worth noting that the situation will improve over the next 6 months. A strong improvement in future sentix is observed in manufacturing production, retail and wholesale sales. The evaluation of the situation (future and current) only deteriorated in the construction industry.

Optimistic reports from the eurozone this week caused the EUR/USD pair to be recorded close to two month highs. However, next week may also be important for the main currency pair. Currently, the market practically discounted most of the positive information for the single currency area (good economic situation, lower political tensions in Germany) and the negative information for the dollar (wide discussion on the possibility of inflation returning to its target).

The next few days may not bring such a favourable coincidence to the EUR/USD pair. The US Senate is likely to vote on the tax act next week. If it turns out that the Republican senators agree with their colleagues in the House of Representatives (especially in the context of fiscal burden reduction on enterprises since 2018), then the market could bet on an accelerating economic growth, increasing inflation and the more restrictive approach of the Federal Reserve. This, in turn, could give an argument to pare the recent dollar's losses.

Stable zloty in relation to the main currencies

Due to a good global sentiment, the zloty maintained most of the recent increases. The EUR/PLN pair is close to the 4.21 boundary and near the lowest levels since the second half of 2015 (3.61 - 3.62 PLN). The dollar's weakness against the euro also caused the USD/PLN to be the cheapest in over two months (3.55).

However, the strong appreciation momentum for the PLN/HUF pair slowed down. This may mean that the optimism on the Polish currency in relation to the Hungarian forint is falling slightly in spite of the significant interest rate disparity and positive global information, which traditionally is more supportive for the zloty than the forint (when sentiment worsens it is the other way round). Today's session in relation to the main currencies should not be a breakthrough, but next week, especially the reports from the US about the changes in taxes may cause the rebound of the last dollar's weakening and may have a negative impact on the entire zloty basket.


24 Nov 2017 12:53|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:

23 Nov 2017 15:14

Afternoon analysis 23.11.2017

23 Nov 2017 12:21

Daily analysis 23.11.2017

22 Nov 2017 15:49

Afternoon analysis 22.11.2017

22 Nov 2017 13:03

Daily analysis 22.11.2017

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