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New records on franc (Daily analysis 16.01.2020)

16 Jan 2020 13:04|Bartosz Grejner

Signing the US trade agreement with China did not have an impact on the dollar, the euro or the yen. Instead, the franc is appreciating strongly to the dollar and the euro. The CHF/PLN exchange rate rises to over 3.94, but the zloty basket is still in good condition.

EUR/USD below 1.12

As expected, yesterday's conclusion of the first phase of the trade agreement had a limited impact on the foreign exchange market. At midday, the main currency pairs continued to oscillate around the pre-event levels, i.e. the EUR/USD pair was quoted approx. 1.1160, the USD/JPY approx. 110 and the GBP/USD approx. 1.30. No significant changes in the market made it possible to continue the franc's appreciation in the global market.

The USD/CHF quotations fell to about 0.9620 in the morning, the lowest level since September 2018. The lows at around 1.0732 were also reached by the EUR/CHF exchange rate - the Swiss currency was the most expensive in relation to the euro since April 2017. A possible decrease below approx. 1.062 will set the lowest levels since the summer of 2015. The global appreciation of the franc also means an increase in its value to the zloty. Although the Swiss currency did not register such records against the zloty as it did against the euro or the dollar, its increase to about 3.945 PLN before midday set the upper limit of its quotations from the second week of October.

The lack of significant increases in the CHF/PLN pair is, among other things, due to the continuing good condition of the zloty basket. Although the zloty lost part of recent increases (approx. 0.1-0.2 % in relation to the main currencies), it still remains at a high level, except for the aforementioned cross with the franc. No appreciation of the dollar and still positive sentiment on the broader market should continue to support the relatively high valuation of the zloty.

Europeans buy new cars

Interesting information was provided today by the European Automobile Manufacturers Association. The number of registered new cars in Europe (more precisely, EU 27) increased in December by 21.7% per year. This is the fastest growth since August 2018. To some extent, it is the result of a weak December 2018, when there was a drop of 8.4%. However, these figures are subject to relatively large fluctuations recently, highlighting both problems (scandals involving emissions) and regulatory changes in the industry. Positive data at the end of the year, indicating a strong increase in sales of new cars, may support the debate of the improving situation of the industry in the eurozone.

However, for a more significant appreciation of the euro, more macroeconomic readings are needed to confirm this trend. The market is currently experiencing a scenario of a stronger euro against the dollar than last year. With positive macro-economic data coming in from Europe, especially from the eurozone, the EUR/USD exchange rate may increase and remain above 1.12 in the following months. As a result, it would most probably also support the zloty basket.

16 Jan 2020 13:04|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:

14 Jan 2020 14:09

Zloty the strongest against euro since 2018 (Daily analysis 14.01.2020)

13 Jan 2020 17:20

Surplus in Polish trade above expectations (Afternoon analysis 13.01.2020)

13 Jan 2020 13:43

Pound's strong depreciation (Daily analysis 13.01.2020)

10 Jan 2020 16:19

Payrolls in the USA have been growing the slowest since 2018. (Afternoon analysis 10.01.2020)

Attractive exchange rates of 27 currencies