Limited changes on pound and zloty (Daily analysis 17.01.2019)

The British Prime Minister won the vote of no confidence in the government. The pound awaits further developments. The zloty is quite stable, although the situation on the market is favourable for it to strengthen in relation to the euro or the franc.

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

• 2:30 p.m.: Initial jobless claims in the USA (estimates: 220 thousand).

Victory was expected

As expected, Prime Minister Theresa May won the vote on non-confidence for the government. However, this had a limited impact on the British currency. The GBP/USD price moves within a relatively narrow range of around 1.283-1.29. Taking into account the scale of the problems in the UK, changes in the pound's quotation are practically microscopic. It is a good sign for the British currency that there is no majority in the British Parliament in favour of a hard Brexit.

The market is becoming less and less likely to accept the UK's chaotic exit from the EU. However, this does not mean that there is no such risk. The upcoming Brexit data of March 29th limits the Theresa May's option. If we reject the least likely scenarios - i.e. second referendum, hard Brexit, no Brexit, new elections - there remains a more mild agreement with a possible postponement of Brexit by a few weeks. We have already heard of this shift from both the EU and the UK (last week's Evening Standard).

The pound against other main currencies (G10) is depreciated. This scenario is positive for the pound and could lead to its appreciation in the range of 5-10% by the end of the year. The less likely but still realistic negative scenarios, which, if implemented, could contribute to the pound's depreciation, halt its appreciation.

No solid statement by the UK Government reflects the pound's ratings. Fluctuations occur in a narrow range. The situation may change as early as Monday because then the deadline for the plan B for the Brexit is over. The steps taken by Prime Minister May, which will bring her closer to the compromise agreement, will reduce the likelihood of negative scenarios for the pound. As a result, at the beginning of next week, we can observe a significant pound's appreciation, and the GBP/USD exchange rate may rise again above 1.30, which is the level observed in mid-November last year.

Zloty with limited changes

The Polish currency remains stable. The recent dollar appreciation and weak macroeconomic data from the eurozone have no major impact on the zloty. The EUR/PLN remains in the 4.28-4.29 range, right at the bottom limit of quotations since the beginning of this year. Slightly better sentiment on the equity market also contributed to the franc's weakening. The exchange rate of the Swiss currency in relation to the zloty fell for the third day in a row and fell to about 3.786, i.e. to the lowest level since the end of December. If the rebound on the global equity market persists, which may be supported by positive information concerning trade negotiations between the USA and China, the CHF/PLN exchange rate may gradually decrease to approx. 3.75.