Another day of improving the dollar condition - the EUR/USD is moving closer to 1.15 handle. The zloty stays stable for the time being, but external factors may rapidly weaken it. Customs and labour market issues in the US among the highlights of next week's event.
Euro loses, franc gets stronger
Friday characterised as another day of the dollar's appreciation. The main currency pair, the EUR/USD, fell to around 1.163, below yesterday's lows, to its lowest level since Monday. The euro was under pressure today and in relation to the Swiss franc it was losing nearly 0.5% and the EUR/CHF exchange rate dropped to around the annual lows.
Eurostat data on consumer inflation (CPI) in the eurozone published today certainly did not help the single currency. In August, it amounted to 2.0%, 0.1 percentage point below the market consensus. To a similar extent, the more important core inflation index also failed, falling to 1.0% per year. Today's reading reduces the likelihood of interest rate hikes in the euro area. In addition, the euro is also affected by Italy's fiscal problems.
This is potential negative information for the zloty, although the Polish currency remained in good shape, especially in the context of the global stock market depreciation (the risk of additional duties in the USA on imports from China). The GDP growth pace in the Q2 was revised by 0.1 percentage point up to 5.2 percentage points year on year, which may have helped the zloty slightly.
The EUR/PLN exchange rate currently fluctuated between 4.29 and 4.30, which was not in line with yesterday's behaviour of this currency pair. On the other hand, the global appreciation of the franc resulted in crossing the 3.81 boundary on the CHF/PLN pair. Its prices were quickly approaching the annual price highs (3.86).
Although the Polish currency stays in good condition, the deterioration of sentiment on the stock market and/or the appreciation of the dollar along with the further strengthening of the franc may eventually trigger stronger falls from which the entire zloty's basket will not be protected.
Next week's preview
On Monday at 9:00 a.m. consumer inflation data (CPI) in Turkey will be published. Typically, it would not have any significant impact on the market. However, this is not the case with the current market sentiment. This includes, among other things, the depreciation of emerging countries' (EM) currencies or the potential imposition of additional duties by the US on imports from China. A median of market expectations indicates an increase in inflation in August from 15.85% to 17.7%. A higher reading, accompanied by the authorities' reluctance to increase interest rates, may cause a new wave of lira depreciation and weaken other EM currencies. This, combined with the strengthening of the dollar, can also put pressure on the entire zloty basket.
Next week's most important publication will not take place until Friday. The US Department of Labor will publish a monthly labour market report (for August). The most important data regards average hourly wages, as it has a significant impact on inflation. The market consensus shows an annual growth rate of 2.8%, 0.1 percentage points more than a month ago and 0.3% compared to July (here the growth pace remains unchanged). Deviation from the consensus by as much as 0.1 percentage point may cause significant changes in the dollar valuation.
This data may arise in the context of the additional duties that President Donald Trump is expected to present just next week. For the time being, these are media reports, not confirmed by the White House officers. The impact of such information on the dollar is not unambiguous. In the long run, the US would do better than other countries, so in theory, it sends a positive signal to the US currency. However, recent months have shown that the dollar can also react to this type of information with a downward trend. As a result, the potential for significant fluctuations in the value of the zloty next week is relatively high.