Dollar on upward trend (Afternoon analysis 19.07.2018)

The US currency appreciates. The number of jobless claims submitted in the USA falls to its lowest level since the end of 1969.

Zloty under pressure

The dollar's appreciation, which began in the morning, is accelerating. The EUR/USD quotations fell below the 1.16 limit (to around 1.157). The main currency pair's rate is moving towards its lowest level in a year (1,150). In the meantime, positive macroeconomic data for the US currency has appeared.

The number of initial jobless claims submitted last week fell to 207k, while the market consensus suggested a reading 13k. This is also the lowest level since December 6th, 1969. Although it is rather secondary data in terms of its impact on the dollar, its publication reflects the general trend of the dollar's strengthening or the recent testimony of the Fed Chairman (to the Congress) about the very good condition of the US labour market.

Strong dollar usually means negative news for the zloty. Today was no exception - the zloty clearly lost against the main currencies. The euro exceeded 4.33 PLN, reaching its highest level since Friday, and the dollar approached 3.74 PLN. Therefore, it was the highest in nearly two weeks. The calendar of scheduled publications for the following hours is practically empty, so the zloty will be affected by the dollar's quotations and what will happen on the US market. If we observe a deterioration in the moods and drops in the main indexes, the zloty, combined with the strong dollar, may be under further pressure in the evening.

Tomorrow's preview

At 10:00 a.m. the Polish Central Statistical Office (GUS) will publish June's data on retail sales in Poland. After an annual growth of 7.6% in May, the median of market expectations assumes that the growth pace will increase to 7.9%. This could be good news for the Polish economy, after better than expected data on industrial production, which may suggest maintaining a high pace of economic growth.

Taking into account the zloty's quotations with regard to better than expected data on wages, industrial production and producer inflation (PPI), it should not be assumed, that there will be any significant changes, even in the case of better than forecasted sales data. External factors continue to play a key role in the zloty's valuation - if they are not favourable (e.g. lack of dollar appreciation, positive sentiment on the stock market), chances for appreciation are limited.

At 10:00 a.m. Eurostat will publish the current account data for the eurozone for May. Since February, the surplus on this account has been gradually decreasing (from 39 billion EUR in January to 28.4 billion EUR in April). It is expected to decline even further to 27.2 billion EUR. The decline in the surplus could exert even more pressure on the euro, which, with a strong dollar, could mean further falls in the EUR/USD. This could also be bad news for the zloty, which usually reacts negatively to a drop in the main currency pair exchange rate. The change itself brought by this Eurostat publication does not have to be large, but may be in line with the general trend of information coming from the eurozone.