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Drops in market strengthen dollar (Afternoon analysis 20.11.2018)

20 Nov 2018 16:36|Bartosz Grejner

Another set of positive data from the Polish economy (this time from the industrial sector) supports its currency. However, the impact of the data was limited due to the worsening sentiment on the global market.

EUR/USD again below 1.14

Today, the zloty was in a much better condition after data from the Polish industry. According to the Polish Central Statistical Office (GUS), industrial production grew in October by 7.4% a year, compared to expectations at the level of 6.7%. This was the highest growth pace since July this year. A positive surprise was also observed in the case of producer inflation (PPI), which amounted to 3.2% y/y in October, 0.2 percentage points above market consensus.

As a result, the euro fell from nearly 4.34 to about 4.31 PLN before 4:00 p.m. In relation to the forint, the zloty also pared some of the losses incurred in the past few days. The PLN/HUF exchange rate increased to about 74.5, reversing yesterday's fall.

Significant decreases in the global equity market increased risk aversion. As a result, the value of currencies perceived as safe, i.e. the dollar, the franc and the yen, appreciated. In relation to these currencies, the zloty lost about 0.2-0.3% of its value.

The continued bad sentiment on the equity market may increasingly strengthen the US currency. Around 4:00 p.m. EUR/USD fell to around 1.138, below yesterday's lows. Such a scenario could be negative for the zloty. It would limit the impact of data from the Polish economy, not only today's data from the industrial sector but also better than expected readings of average wage and GDP growth.

Tomorrow's preview

At 2:30 p.m., the US Department of Labor will publish a weekly report on initial jobless claims. The median of market expectations points to a slight decrease (by 1,000) in the number of claims and a further decrease in the number of insured unemployment, to 1,635 million people.

At the same time, the US Census Bureau will also present data on orders for durable goods, which are usually a reliable measure of industrial processing activity. Excluding highly volatile transport orders, the market consensus assumes an increase of 0.4% per month against 0.1% in September.

The dollar was under pressure due to the suggestions from the vice-president of the Federal Reserve. He indicated that monetary tightening may not be as fast as the market expected. However, as a result of today's drops on the equity market, the dollar was appreciating. If the USD manages to maintain current levels (about 1.14 per EUR/USD) also tomorrow, a positive set of the aforementioned data may slightly strengthen the dollar, in particular, if the negative sentiment on the global equity market persists.

20 Nov 2018 16:36|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:

20 Nov 2018 13:48

Decreased pressure on zloty (Daily analysis 20.11.2018)

20 Nov 2018 12:30

Cryptocurrency market lost 650 billion USD

19 Nov 2018 15:29

Weak dollar protects zloty (Afternoon analysis 19.11.2018)

19 Nov 2018 12:34

Weaker zloty (Daily analysis 19.11.2018)

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