Dollar keeps its profits (Daily analysis 9.11.2018)

No significant changes in the FOMC statement, but the dollar is appreciating. Mixed data from the British economy. The relatively good condition of the zloty. The euro and the dollar remain below 4.30 PLN and 3.80 PLN, respectively.

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

• A lack of macro data may noticeably impact the analyzed currency pairs.

Stronger dollar

Yesterday's Federal Reserve meeting did not bring any significant changes in the statement. Compared to the end of September, FOMC pointed to falling unemployment, but the description of the labour market itself has not changed and is still considered to be strong. The issue of investments, whose rapid growth is now moderate, was assessed as slightly worse. In general, however, none of the crucial parts of the statement have been modified.

The strong US currency appreciation after the publication of the FOMC statement is therefore somewhat surprising. Perhaps some investors expected some kind of dovish signal, which would suggest a pause in the increases in the first months of 2019. Of course, nothing of the sort happened. This time, the currency market was also to some extent ahead of the behaviour of longer instruments. 10-year bond yields needed a good dozen or so minutes to exceed the level before the publication of the Fed's statement. In general, however, yields are lower around midday than at the end of yesterday's session, but the dollar is stronger.

As a result, although there is still a belief that the dollar probably still has new highs ahead of it, the recent increases in the US currency are somewhat exaggerated. If the global situation calms down (less fear of foreign trade, strong oil price drops), it will be difficult for the dollar to strengthen, especially against the currencies of emerging countries. It seems that only the lack of progress in future trade relations between China and the United States at the G20 summit (end of November) is a catalyst that should strongly support the dollar and harm the currencies of emerging countries and the euro.

Mixed data from Great Britain

Forgetting about Brexit for a moment, it is worth looking at a series of macro data from the British economy. GDP for Q3 was in line with expectations (growth of 0.6% Q/Q and 1.5% y/y). The foreign trade balance looks better than expected, even taking into account the fact that the data are often revised quite severely. The deficit (trade in goods and services) fell from over 2 billion GBP in August to just 27 million GBP in September.

The industrial production behaved slightly worse than expected and instead of growing by 0.4% y/y, it remained unchanged in September. This is the worst reading since the end of 2017. Interestingly, contrary to data from the continental part of the EU, the production of means of transport was not the main reason for the weak result (increase by 1.2% y/y). Negative contributions were from clothing, wood, petrochemicals, industrial metals and machinery. As a result, data was mixed or minimally supporting the pound, especially due to trade-related readings, taking into account all elements.

Zloty resists pressure from dollar

Despite the fact that EUR/USD approaches the 1.5-year lows, the zloty's behaviour is relatively positive. The zloty is also slightly stronger in relation to the forint, but the strengthening does not exceed 0.2% since Wednesday.

The zloty and the forint profit from a slightly better sentiment towards the currencies of emerging countries (less concern about foreign trade, significant oil price drops), and the stronger dollar is not able to induce sufficient pressure to significantly weaken the zloty or the HUF. Although the EUR/PLN may return to around 4.30 and the dollar may test 3.80, the further risk of a more serious weakening of the Polish currency without worsening the situation related to foreign trade remains limited.