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Daily analysis 28.08.2017

28 Aug 2017 11:35|Bartosz Grejner

The dollar's new lows against the euro since January 2015. Investors were disappointed by the neutral speeches from Janet Yellen and Mario Draghi. The weaker dollar is positive for the Polish currency but today its potential appreciation is limited by a somewhat worse sentiment in the market until midday.

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

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

New peaks for EUR/USD

A long awaited conference in Jackson Hole (USA) where some of the world's main central bankers have held speeches has disappointed market expectations. Friday's appearances from Janet Yellen (Federal Reserve) and Mario Draghi (European Central Bank) did not include the monetary policy or possibilities of any changes in the future.

While the market consensus pointed to neutral speeches, some market participants were disappointed by Yellen and Draghi. The absence of aforementioned references has caused a significant depreciation in the dollar. Taking into account the recent devaluation of the dollar, some investors could expect the Federal Reserve Chairman to present a slightly hawkish stance on the monetary policy.

Their absence provided an excuse for the significant depreciation of the dollar, which has been under pressure from both political and macroeconomic factors (mixed data from the economy). The weakness of the US currency is particularly visible in relation to the euro, which in turn, is reinforced by the good (and improving) economic situation of the single currency area and the market expectations on QE tapering.

Today, the euro in relation to the dollar set new exchange rate peaks from January 2015. The EUR/USD pair traded at 1.196. At the beginning of the European session, the rate fell to approximately 1.193. The remaining pressure on the dollar could trigger the crossing of the boundary of 1.20.

This week, we can observe very significant fluctuations of the dollar against most currencies. The week will be full of relevant US currency data. On Wednesday, another reading of GDP growth in Q2 and ADP data on employment change will be published. The following day, July's PCE inflation report will be released. This index is used by the Federal Reserve to create inflation projections. On Friday, August's labour market report will be made public.

This week, as a result, may be set a new trend for the coming weeks in which the US currency will probably follow. We will probably have to wait until Friday afternoon for the final reaction of the dollar once all the key data is known.

USD/PLN at new lows

The aforementioned weakness of the dollar has also made the zloty its strongest against the dollar since mid-May 2015 (3.555). The good economic situation in the eurozone and the weak dollar have been a positive combination for the Polish currency, which has gained in this type of scenario in recent months. However, the zloty has still been sensitive to changes in market sentiment which may reflect in its value.

Today, we observed the decline in the European exchange core indexes until midday and the zloty and franc's appreciation, which despite the aforementioned factors, caused pressure on the zloty. The Polish currency lost approximately 0.2% against the euro and the pound, and 0.4% against the franc. In the following trading hours, a relatively low volatility of the course can be observed. The calendar of events scheduled for the rest of the day is almost empty, and liquidity may be slightly less due to a day off in the UK's trading (Bank Holiday).


28 Aug 2017 11:35|Bartosz Grejner

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.

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