Peaceful currency market (Daily analysis 07.02.2018)

Yesterday's afternoon market growth in the US was observed and today's European market calmed the sentiment. The zloty remained stable, but the dovish tone from today's MPC or further declines in the USA may weaken the dollar even further.

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

• 4:00 p.m.: Statement and press conference after two-days meeting of the Polish MPC.

Sentiment cooled down

Yesterday an over 2% rebound of the main US indexes, which improved the market sentiment, was observed. In the morning, the European indexes were at around 0.5%. This is a good signal for the zloty. Yesterday afternoon, it pared losses as the US indexes grew rapidly. The zloty's quotations were stable in the morning and were within the range observed in previous days - one euro cost around 4.155 PLN and one dollar cost 3.36 PLN.

The dollar stayed within yesterday's closure levels. The dollar index (DX), measuring its strength in relation to the six main currencies, was around 89.5 points (the same as yesterday evening). Also, the EUR/USD quotations remained relatively stable and were slightly under the 1.24 boundary.

At 8.00 a.m. Destatis published December's data on industrial production in Germany. The production scored a decrease of 0.6% (0.4% was expected) on a monthly basis; the previous month's data was revised downward by 0.3 percentage points. However, while looking at the previous two years, production also declined in December, so December's fall (even limited) may be ignored by the market. Mainly due to the fact that yesterday's industrial orders data for December was optimistic. New orders increased by 3.8% month-to-month (0.7% was expected). This may suggest that the production will increase in the coming months.

The currency market reaction to this data was limited. There aren't many macroeconomic events in today's calendar. However, the Federal Reserve's members have their speeches today, i.e. Robert Kaplan (12.00 p.m.) and William Dudley (2.30 p.m.), it is likely that they will not introduce anything that may cause a significant impact on the dollar's quotation and on other currencies, including the zloty.

MPC important but the US share market even more

The zloty's quotations should stay relatively stable today, although the high volatility of market and today's MPC statement and press conference are also important. Interest rates will remain unchanged, but the Council's message will be crucial.

MPC President, Adam Glapiński, keeps his accommodative stance towards monetary policy - he does not expect any changes in interest rates over the coming year. If the number of MPC members who share his opinion increases and the statement and message from the conference will be very mild, the zloty may depreciate somewhat, although the changes will be rather limited.

The zloty's quotations may be subject to the US market's behaviour in the afternoon. Although stock markets in Europe are appreciating, futures contracts for main indexes in the US are at about minus 1%. The deepening of these declines in the following hours after the opening of the exchange market may have a negative impact on the zloty, given the potential increase in risk aversion and the outflow of capital from emerging countries.