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Dollar slightly stronger (Afternoon analysis 17.10.2018)

17 Oct 2018 15:57|Bartosz Grejner

The US currency appreciates slightly, but the changes are limited. An evening report from Fed members' talks may increase this fluctuation range. Changes in the zloty's valuation are also limited, but after a series of weak data from the domestic economy, the Polish currency may be more sensitive to negative external factors.

Will EUR/PLN breach 4.30 level?

Around midday, the dollar appreciated slightly. The EUR/USD quotations fell to about 1.152 at around 2:00 p.m., compared to 1.158 in the morning. However, this is a slight change in the context of the last week, when the quotations were mainly in the narrow range of 1.15 - 1.16.

This slight strengthening of the US currency (by about 0.3%) may be a result of the expectation of the afternoon minutes' publication from the last Federal Reserve (Fed) meeting. Given the rapid growth pace of the USA, the evening publication should be somewhat neutral or positive for the dollar, that is why the dollar is likely to appreciate this evening.

This publication will also be important for the Polish currency. The zloty is not supported by domestic data, which failed to meet market expectations (today the Polish Central Statistical Office indicated that industrial production increased in September by only 2.8% y/y, compared to 5.0% a month ago). It may now be much more vulnerable to the dollar appreciation or a drop in the equity market.

No breakthrough should be expected after the minutes' publication (8:00 p.m.). However, if the EUR/USD exchange rate falls to about 1.15, the zloty basket may weaken. In this case, the EUR/PLN pair may exceed 4.30, and the USD/PLN pair may move towards 3.75.

Tomorrow's preview

At 10:30 a.m., the Office for National Statistics (ONS) will publish retail sales data for the UK. This week's data from the UK turned out to be mixed (wages rose above expectations, inflation fell below expectations). The median of expectations for September sales excluding vehicles and fuels indicates an annual increase of 3.7%, 0.2 percentage points more than in August. A positive retail sales' reading could give some support to the British currency weakened by lower than expected inflation, although the most important in the final analysis will be the reports from the Brussels summit on Brexit.

17 Oct 2018 15:57|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

17 Oct 2018 13:04

Inflation falls in the UK (Daily analysis 17.10.2018)

16 Oct 2018 16:25

Stable zloty despite weak data (Afternoon analysis 16.10.2018)

16 Oct 2018 12:35

Weak data from eurozone and Poland (Daily analysis 16.10.2018)

15 Oct 2018 15:15

Retail sales in US fails (Afternoon analysis 15.10.2018)

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