Market under limited fluctuations (Daily analysis 27.02.2018)

The sentiment indexes highlight the good condition of the eurozone. No major changes were observed on the dollar and the zloty, but the new head of the Federal Reserve may increase the volatility on the currency market.

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

• 2:00 p.m.: February's consumer inflation for Germany (estimates: 1.5% YOY; previously 1.7%),
• 2:30 p.m.: January's orders for durable goods in the USA (estimates: -2.4% MOM; previously 2.8%),
• 4:00 p.m.: Beginning of Jerome Powell's speech to the US Congress.

EUR/USD still close to 1.23

The morning contained no significant movements on the currency market's quotations. The main currency pair (the EUR/USD pair) was moving in a narrow range of around 1.232 to 1.234. At 11.00 p.m., the European Commission published the results of a survey examining sentiment among consumers and businesses in the eurozone for February.

The sentiment index fell to 114.1 points, which was only slightly higher than the market consensus (0.1 points). January's data was also revised upward (by 0.2 points to 114.9 points). Although the index fell somewhat, it is still just below 17-year highs.

The service sector's sentiment index turned out to be good, increasing to 17.5 percentage points, which is 1.2 percentage points above the market consensus and near the 10-year records from December. The aforementioned data only highlights what was known for some time - the eurozone’s economy is in very good shape and for the time being, there are no signs that it will suddenly slow.

However, the good data for the euro itself had a limited impact on the currency market. The most important event of the day, as well as a signal for increasing market volatility, may be the beginning of new Federal Reserve President Jerome Powell’s testimony (around 4.00 p.m.), to US Congress. It will be his first appearance in the new role, which may provoke a greater reaction to his comments on the market.

Attention should be focused on February's preliminary consumer inflation (CPI) data in Germany, which will be published at 2.00 p.m. If it exceeds the consensus of 1.5% year-on-year in the largest European economy, this could suggest a slightly higher level of consensus across the eurozone and slightly strengthen the single currency.

This could be a good signal for the zloty, which may appreciate together with the euro's strengthening and the improvement of the eurozone's condition. However today, the data's impact may be limited. Volatility on the zloty was low today- compared to the main currencies it was at levels similar to yesterday. However, the situation may change with Powell's speech. If it is understood as hawkish and a sale on the US market is observed and/or the dollar is strengthened, the Polish currency maybe under pressure and depreciate by 0.01-0.02 PLN in relation to the main currencies.