After better than expected wage growth pace data, inflation data for the UK was published today. In September, the inflation was below market expectations. A set of weak data from Poland. Industrial production rose the least since March on an annual basis in September.
The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.
8:00 p.m.: Publication of record of talks from the last Federal Reserve meeting.
Minor fluctuations on EUR/USD
Next worse than expected data from Poland. Today, the Polish Central Statistical Office (GUS) published data on Poland's industrial production in September, which failed to meet market expectations. A similar situation was observed in the case of yesterday's increase in average wages and employment and core inflation. Industrial production increased by 2.8% per year, 1.5 percentage points below market consensus, and recorded the lowest growth since March.
Before midday, the zloty depreciated against the main currencies, the EUR/PLN exchange rate was quoted around 4.29 and the USD/PLN around 3.71. The zloty is currently supported by positive sentiment on the global equity market and the lack of a clear dollar's appreciation. However, this set of weak data from the Polish economy may eventually become a burden to the zloty, especially if an increase in the dollar is observed.
The main currency pair moved within a limited fluctuation range, the EUR/USD exchange rate fell from around 1.158 to 1.155 in the morning. This very small range can be extended in the evening, when minutes from the last Federal Reserve's meeting, where interest rates were raised by 25 basis points, will be published.
There should not be any breakthrough and a dovish message from minutes is not to be expected either. There are no arguments from macroeconomic data to start discussion suggesting a slowdown in the pace of interest rate increases. Moreover, it is also unlikely that one of the Fed members yields to the pressure of President Donald Trump, who criticizes the raising of interest rates. Around publication time, a significant increase in the dollar fluctuations can be expected in the area, although in the end, they do not have to translate into large changes in the valuation of most currencies. However, taking into account recent weaker data from Poland, a slight appreciation of the dollar may cause increased pressure on it in the evening.
Published today data from the UK was also worse than expected. Consumer inflation (CPI) in September was 2.4% year-on-year, 0.3 percentage points less than in August and 0.2 percentage points below expectations. The reading of the more significant core inflation (excluding energy and food prices) amounted to 1.9% against a consensus of 2.0%. However, this level was also observed in June and July, with the exception of August, when the core index unexpectedly moved to 2.1%. In the long run, these indexes will not have a significant impact on the pound's quotations. The most important issue remains the form Brexit and on it will depend to large extent inflation and the pace of the UK's development in the coming years.
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:
16 Oct 2018 16:25
Stable zloty despite weak data (Afternoon analysis 16.10.2018)
After better than expected wage growth pace data, inflation data for the UK was published today. In September, the inflation was below market expectations. A set of weak data from Poland. Industrial production rose the least since March on an annual basis in September.
The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.
Minor fluctuations on EUR/USD
Next worse than expected data from Poland. Today, the Polish Central Statistical Office (GUS) published data on Poland's industrial production in September, which failed to meet market expectations. A similar situation was observed in the case of yesterday's increase in average wages and employment and core inflation. Industrial production increased by 2.8% per year, 1.5 percentage points below market consensus, and recorded the lowest growth since March.
Before midday, the zloty depreciated against the main currencies, the EUR/PLN exchange rate was quoted around 4.29 and the USD/PLN around 3.71. The zloty is currently supported by positive sentiment on the global equity market and the lack of a clear dollar's appreciation. However, this set of weak data from the Polish economy may eventually become a burden to the zloty, especially if an increase in the dollar is observed.
The main currency pair moved within a limited fluctuation range, the EUR/USD exchange rate fell from around 1.158 to 1.155 in the morning. This very small range can be extended in the evening, when minutes from the last Federal Reserve's meeting, where interest rates were raised by 25 basis points, will be published.
There should not be any breakthrough and a dovish message from minutes is not to be expected either. There are no arguments from macroeconomic data to start discussion suggesting a slowdown in the pace of interest rate increases. Moreover, it is also unlikely that one of the Fed members yields to the pressure of President Donald Trump, who criticizes the raising of interest rates. Around publication time, a significant increase in the dollar fluctuations can be expected in the area, although in the end, they do not have to translate into large changes in the valuation of most currencies. However, taking into account recent weaker data from Poland, a slight appreciation of the dollar may cause increased pressure on it in the evening.
Published today data from the UK was also worse than expected. Consumer inflation (CPI) in September was 2.4% year-on-year, 0.3 percentage points less than in August and 0.2 percentage points below expectations. The reading of the more significant core inflation (excluding energy and food prices) amounted to 1.9% against a consensus of 2.0%. However, this level was also observed in June and July, with the exception of August, when the core index unexpectedly moved to 2.1%. In the long run, these indexes will not have a significant impact on the pound's quotations. The most important issue remains the form Brexit and on it will depend to large extent inflation and the pace of the UK's development in the coming years.
See also:
Stable zloty despite weak data (Afternoon analysis 16.10.2018)
Weak data from eurozone and Poland (Daily analysis 16.10.2018)
Retail sales in US fails (Afternoon analysis 15.10.2018)
Failure in Brexit talks (Daily analysis 15.10.2018)
Attractive exchange rates of 27 currencies
Live rates.
Update: 30s