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Positive sentiment on the market (Afternoon analysis 24.07.2018)

24 Jul 2018 13:14|Bartosz Grejner

Good data from German industry and positive sentiment on the global share market supported the zloty. The probability of significant fluctuations is still limited today, but tomorrow's reports from the EU-US meeting may increase them.

EUR/USD returned to around 1.17

Today, a much better sentiment dominated the broad market. It is the result of a positive session in Asia, better than expected results for the Q2 of Alphabet (Google's parent company), as well as good PMI data from Germany's industrial sector. Although economic activity in the eurozone's peripheral countries was weak, positive information on Europe's largest economy was sufficient to support the single currency as well.

The EUR/USD exchange rate rose again to around 1.17, although despite good data from the euro area, it moves within a narrow fluctuation range. A similar situation applies to the zloty. The Polish currency was in better condition after good data for Germany, but the volatility in relation to the basic currencies was limited and remained within the ranges observed in the previous days.

Taking into account the current very good sentiment in the market and the practical absence of significant events planned, which could have a significant impact on the currencies in the rest of the day, the quotations of both the zloty and the euro versus the dollar will probably fluctuate around the current levels. The market attention may already be focused on international trade, although the EU representative's meeting with the administration is scheduled for tomorrow.

Tomorrow's preview

At 10:00 a.m. the Ifo Institute will publish German business climate index for the current month. The median of market expectations indicates a slight decline from 101.8 to 101.6 points. Tensions in international trade have led to a significant decline in sentiment among companies, which reached historic levels at the beginning of the year.

However, today's preliminary PMI readings of Germany's industrial sector have surprised with a positive outcome. Perhaps a similar increase in the Ifo index will be seen, which could support the euro. It should be remembered that discussions on trade issues between the US and the EU will be the most important issue on which the market will focus its attention.

At 4:30 p.m., the US Energy Information Agency (EIA) will publish a weekly report on the US fuel market. Around the publication time, significant fluctuations in the oil market are expected. However, its impact in the present situation is not clear. Last week, US oil production rose to a record 11 million barrels per day, stocks also increased in total, but prices also rose.

Geopolitical tensions, such as international trade issues and sanctions against Iran, seem to have a greater impact on the black gold quotations at the moment. Oil has a significant impact on inflation, but it is also important for countries such as Poland, which are forced to import this raw material. Higher prices mean that imports have a negative impact on GDP. Despite the positive impact on inflation, both for the Polish economy and for the Polish currency, lower oil prices are more preferential. The White House administration seems to be pursuing a policy of lowering oil prices, putting pressure on OPEC and Saudi Arabia, but action such as sanctions against Iran is having the opposite effect.


24 Jul 2018 13:14|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:

24 Jul 2018 12:42

PMI only in Germany meets expectations (Daily analysis 24.07.2018

23 Jul 2018 15:47

Market awaits for signals (Afternoon analysis 23.07.2018)

23 Jul 2018 12:50

Weaker yuan and zloty (Daily analysis 23.07.2018)

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