Market awaits for signals (Afternoon analysis 23.07.2018)

While awaiting the news regarding international trade, the dollar or the zloty's quotations are within a limited fluctuation range. This afternoon will probably be a relatively quiet one.

EUR/USD still close to 1.17

When there were no major macroeconomic publications or events on the market, the sentiment from the end of last week dominated the market today. In the background, international trade and potential additional duties remain as issues. This suppresses positive sentiment on the market, which is observed on the share market. Around 3:00 p.m. the main currency pair remains close to 1.17 p.m., i.a. the upper limit for the last two weeks.

Small changes were observed on the zloty. However, if the very good macro data from the Polish economy from last week and the current relatively weaker dollar's condition are taken into account, the zloty may soon come under pressure. Moreover, the lower dollar valuation currently appears to be temporary. The rapid pace of economic growth in the US and ongoing inflation mean that the Federal Reserve is likely to raise interest rates twice more this year, which will support the US currency.

The calendar of significant macroeconomic publications for the rest of the day is almost empty, therefore the fluctuations on the dollar will be rather limited. It may be the same in the case of the zloty, although a lot may depend on the US session and the sentiment existing on it. The period of publishing the results for the Q2 has already begun, so we can expect an increase in the fluctuation range. Increases in the main indexes could support the zloty, although significant volatility can be expected tomorrow (today, the results are published by Google just after the session, and tomorrow, more prominent companies have their publications).

Tomorrow's preview

Tomorrow, the IHS Markit will publish preliminary data on PMI indexes for the industrial sector and services for the eurozone (10:00 a.m.) for July. The median of market expectations shows a slight decline in both cases, by 0.2 percentage points in the industrial sector (to 54.7 percentage points) and by 0.1 percentage point in the services sector (to 54.8 percentage points). Recent months have shown a downward trend in industrial activity. At the same time, its growth was observed in the services sector, which in a way limited the decline in the composite PMI index. A greater than expected decline in the PMI in the eurozone may burden both the single currency and the zloty.

At 3:45 p.m., the IHS Markit will present corresponding indexes for the US economy. The market consensus shows that the services sector index remains unchanged at 56.5 and the industrial sector at 0.4 to 55.1 points, respectively. However, this data may have a very limited impact on the dollar's quotations. In the case of the US economy (and the quotations of the US currency), the readings of a similar index are much more important, but the ISM and the market will focus more on them (publication will be on Wednesday next week ).