Daily analysis 27.02.2017

The pound wore-off after “The Times” informed about a possibility of recurrence of the independence referendum in Scotland. The market anticipated President Donald Trump’s testimony in front of the Congress. The zloty is slightly weaker.

Most important macro data (CET – Central European Time). Estimates of macro data are based on Bloomberg information, unless marked otherwise.

• 14.30: Orders for durable goods in the USA for January (estimates: positive 1.7% MoM, excluding transport: positive 0.5% MoM).

Referendum in Scotland?

The GBP/USD was at the level of 1.2480 shortly after the weekend. However, shortly after midnight, “The Times” published an article which contained an information that according to anonymous sources, Theresa May’s government may allow Scotland to conduct another independence referendum. This caused the pound to wear-off by approximately 80 pbs within one hour.

In September 2014, Scots decided that they want to remain within the United Kingdom. However, the pound’s index lost approximately 4% before this event. Back then, surveys slightly overestimated the chances of Scotland leaving the UK. Theoretically, this should decrease the fear of the referendum now.

Nevertheless, much has changed in the United Kingdom over the past two years. Most of all, Brits decided to leave the European Union, but Scots voted in favor of staying within the EU. However, Scots neither want to repeat the referendum, nor are the majority of them in favor of separation (according to surveys).

This news from The Times will most likely add uncertainty to the discussion regarding Brexit. However, this shouldn’t be a strong catalyst of changes in the pound’s evaluation. The matter of the general economic condition of the UK, as well as actions from the Bank of England, are the most important for the time being.

Hints from Mnuchin

The US Secretary of the Treasury confirmed on Fox News that Donald Trump will speak of the planned tax changes during his testimony in front of the Congress this Tuesday.

According to Mnuchin, one of the reigning administration’s priorities are a decrease in regulatory burdens, as well as close cooperation with the Congress. Nevertheless, another interview with Mnuchin confirmed that fate of the Border Tax Adjustment remains unclear. He said that Trump supports some of its elements.

We have been repeatedly noting the significance of Trump’s testimony recently (according to CNN it starts at 21.00 EST on Tuesday.) We can assume that it will mainly refer to economic matters. However, we can’t be sure that the other elements (e.g. health care reform, immigration, external political discussion) won’t eclipse the economic matters. If this happens, the dollar’s appreciation may be postponed until presentation of the budget plan for the fiscal year 2018 in mid-March.

Sentiment harmed zloty

A strong overvalue in the European stock markets has deteriorated the sentiment towards the zloty. The EUR/PLN was near the area of 4.32. Today, the situation calmed down, because a new quotation record in the American stock market decreased the fear of a further increase in the risk aversion. As a result, the EUR/PLN was pushed to the 4.31 level.

Investors anticipate Donald Trump’s testimony. If it appears that it mainly concerns the economic matters, we can expect that the dollar will become stronger and the EUR/PLN will remain stable. In other case, the dollar may lose value, which may also be caused by a deterioration of the global sentiment. Moreover, the euro may increase by 0.02-0.03 PLN.