Dollar in downward correction, EUR/PLN down in the wake of gas, yen tests Bank of Japan's patience (Daily analysis 19.10.2022)

Sharp falls in gas prices, and a break in oil price rises are easing fears of an energy crisis. An upward correction is unfolding on Wall Street, with encouraging news coming from the most closely watched companies, including Netflix. The market environment finally favours risky currencies, e.g. the EUR/PLN pushed through 4.80 for the third time.

The US dollar has lost ground against most main currencies in the past few days, but the reshuffle is still corrective. It will only be possible to speak of a breakdown of the trend favourable to the dollar once the EUR/USD returns above parity. The exception is the yen, which is at its weakest in thirty years. This year alone, it has lost around 23% to the USD, more even than the heavily battered Hungarian forint. Only the Turkish lira, stuck in a sell-off spiral, is weaker. The USD/JPY is approaching the 150.00 barrier, with currency interventions to strengthen the Japanese currency hanging in the air.

Europe has prepared for the threat of a gas crisis as well as possible, which has also been greatly helped recently by the weather. Crude storage facilities have been filled to 92% against a five-year average of just under 88%, and in Germany, the ambitious goal of rebuilding stocks was achieved several days in advance. Industry reports speak of tankers filled with LNG queuing up to unload at gas ports. As a result, gas prices collapsed on European markets. On Wednesday, the price in the contract with one month's delivery fell sharply for the fifth session in a row and took a course towards 100 EUR/MWh. As a reminder, at the apogee of the panic in August, when Gazprom was amid blackmail, prices momentarily exceeded 330 EUR/MWh, and in the third quarter, the average rate was just over 200 EUR/MWh.

The upward trend in crude oil prices has broken down in the past week. In London, a barrel of Brent once again costs around 90 US dollars and has fallen by around 8% since 7 October. Therefore, the current situation on the energy commodity markets is favourable for both the euro and the zloty and is conducive to easing fears of an energy crisis. However, it should be remembered that the period of the fastest recovery of gas stocks is currently underway. Usage for electricity generation is lower than in the summer, and the heating season has not yet begun in earnest. The concern was that gas might run out in winter rather than early autumn. In the coming weeks, as temperatures drop, the situation could become more complicated.

First of all, with current gas supplies from Russia representing a fraction of the typical flow of previous years, even storage facilities filled to the brim do not guarantee energy security. After all, their capacity accounts for around a third of European gas consumption during the heating season. Further attempts to sabotage the infrastructure cannot be ruled out, nor can the imposition of sanctions by Gazprom on Naftogaz be ruled out, leading to the suspension of transit through Ukraine. In summary: at the start of the heating season, the situation on the energy market looks encouraging, but there is no guarantee that this will be the case until the end of the season, especially if long-term meteorological models predict that the coming winter is likely to be mild.