The dollar depreciates before GDP data from the USA. Geopolitical issues with a limited impact on currencies. The zloty appreciates due to the weaker dollar but maintains low levels in relation to the forint. The euro is close to the 4.31 PLN boundary, and the dollar is clearly falling below the 3.80 PLN level.
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.: US GDP reading for Q4 2018 (estimates: 2.2% annualised and seasony adjusted).
Geopolitics in the background
When it turned out that the summit between the leaders of North Korea and the US ended without any common statement or concrete plans for future meetings, the dollar appreciated slightly. S&P500 futures contracts fell slightly. Overall, these changes were marginal, and the market is hardly interested in them. They are probably received in the same way as other disputes that have been going on for years, such as the one between Pakistan and India.
After all, after a slight dollar strengthening, there was a weakening of the dollar quite quickly. The EUR/USD exceeded the 1.1400, the highest levels in three weeks. The weaker dollar is not a particular surprise, as the Federal Reserve practically withdrew from further tightening of monetary policy, and the debate on averaging the inflation target in the current economic scenario means a milder monetary policy.
However, it is somewhat surprising that in this weakness race between the dollar and the euro, the other currency does not win. The prospects for the European economy are weaker than for the US economy. The risks posed to the stability of the eurozone are also greater than across the ocean. In addition, there is the question of elections to the European Parliament. A change in the power balance in the Union is unlikely to improve economic prospects. The current account surplus is, of course, is in favour of the eurozone, but when looking at the foreign trade data of recent months, the surplus may also decrease.
As a result, the deepening of the dollar's weakness is still not expected to cause the continued growth of the main currency pair beyond the highs of the last 2-3 months (1.1550). Only with the accumulated set of positive information (China, Brexit, no changes during the EP elections) can we expect better prospects for the euro.
Beneficial conditions for the zloty
Lower dollar valuation is good for the zloty or the forint. Since last Thursday they have appreciated about 1.4% to the US currency. However, the zloty does not pare earlier losses to the forint, which might be an effect of internal threats to the Polish currency. Previously, mild monetary policy was a threat, and now the effects of aggressive growth in public finance spending, which will contribute to a short-term increase in consumption rather than improve prospects for long-term economic growth and will contribute to debt reduction. The zloty is still close to more than annual lows in relation to the forint.
The next few hours should not be particularly interesting when it comes to the Polish currency. The publication of the US GDP for the Q4 may be interesting (with a weak reading the downward pressure on the dollar may deepen), but the data are historical, so the market may simply ignore them if they do not significantly deviate from the market estimates. Despite favourable conditions, there is a slight chance that the EUR/PLN exchange rate will fall below the 4.30 level.