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Dollar again above in green (Daily analysis 19.07.2018)

19 Jul 2018 11:48|Conotoxia.com

Positive data from the Polish economy did not help the zloty - the zloty depreciated in the morning as the dollar strengthened. Another set of negative news for the pound, this time retail sales failed.

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

  • 2:30 p.m.: Initial jobless claims in the USA last week (estimates: 220k).

GBP/USD below 1.30

The beginning of a trading day started with the dollar appreciation. The EUR/USD pair fell from around 1.165 to 1.16, thus reversing the whole gains from yesterday's afternoon. Moreover, this is the lower limit of the main pair's quotations. The dollar index (DXY), its relative strength in relation to the six main currencies, fluctuates just at the upper limit from the end of the last year (approx. 95 points). It should not be a surprise due to the current dollar upward trend and the recent statements by the Chairman of the Federal Reserve confirming the willingness to continue the path of gradual interest rate increases in the United States.

The share market slightly came off recent growths. The main Asian indexes ended the day below in red, also their European counterparts and futures contracts for the US indexes depreciated. This, together with the strong dollar, does not create a positive situation for the zloty. Today, the zloty in relation to the main currencies depreciated - in the morning the euro cost 4.32 PLN, while yesterday it was about 0.02 PLN and two days ago it cost 0.03 PLN less.

According to macroeconomic data coming from Poland, the optimistic scenario has come true - average wages, industrial production and inflation among producers (PPI) increased above expectations in June. The zloty's fall despite this good information indicates that external factors play the biggest role in the zloty's valuation. Moreover, all of these factors will probably work against the zloty, therefore the zloty is likely to depreciate, and soon euro may cost 4.40 PLN and the dollar 3.80 PLN.

Thursday was also not a good day for the pound. The British currency is under pressure from Brexit (the UK Prime Minister's problems with the Brexit plan and the opposition she faces) and from weaker inflation data. Today, the Office for National Statistics (ONS) has again 'hit' the pound with retail data was also below the market expectations. Retail sales were expected to grow by 3.7% year-on-year, but in fact, increased only by 2.9%.

The more relevant core index (excluding car and fuel sales) increased by 3.0% vs. expectations of 0.5 percentage points higher. It is not tragic data, it is unlikely to help the pound. The British currency against the dollar fell below 1.30 today for the first time since the first week of September last year. Also in relation to the zloty it depreciated, but the relatively weak zloty's condition of the Polish currency will rather prevent from a significant drop in the GBP/PLN exchange rate.

Today, the Chinese yuan clearly depreciated - in relation to the dollar it was the cheapest in a year. This is probably caused by the verbal conflicts between the US and China over customs. The White House Administration is suggesting that the Chinese President is blocking talks on trade and therefore is making it more difficult to avoid customs wars. These conversations, according to the White House officials, got stuck. These accusations have been rejected by China today, saying that China is doing all it can to avoid customs wars, but adding that it is not afraid of them. This exchange between the USA and China may worsen sentiment on the market, which may also have a negative impact on the zloty.

19 Jul 2018 11:48|Conotoxia.com

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:

18 Jul 2018 15:11

Slightly weaker zloty (Afternoon analysis 18.07.2018)

18 Jul 2018 11:17

Stronger dollar (Daily analysis 18.07.2018)

17 Jul 2018 15:45

Brexit as a burden to the pound (Afternoon analysis 17.07.2018)

17 Jul 2018 10:45

Euro close to 4.30 (Daily analysis 17.07.2018)

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