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Pound crosses the key level of 5.00 PLN (Daily analysis 22.01.2020)

22 Jan 2020 13:19|Bartosz Grejner

The pound continues to appreciate - the GBP/USD pair moves to 1.31 after higher-than-expected readings from the UK economy. The GBP/PLN pair crosses 5.00 PLN first time since January 10th this year, but the zloty's basket remains stable.

Virus from Wuhan does not influence currencies' exchange rate

Sentiment in the broader market remains positive. Even before midday, the index of the 30 largest companies listed on the German DAX Exchange climbed to historic highs - slightly above 13.6 thousand points. One of the factors behind this growth was yesterday's readings of the ZEW index, which indicated that economists' expectations of the German economy are at their highest level since mid-2015.

Incoming media reports about the spread of a new virus, believed to have its origins in Wuhan (China), are currently having a limited impact on the market. Yesterday's falls on Asian markets and initially also on the European ones have been used by traders as an opportunity to buy. In addition, the influence of information about the dangerous disease is also small on the foreign currency exchange market. The yen or the franc, traditionally perceived as so-called safe havens, do not record any significant increases in value.

The main currency pair's quotations, i.e. the EUR/USD, remain within a limited fluctuation range. Yesterday, during the wave of optimism after the publication of the ZEW index, they increased above 1.11, but today they fell back below this limit - to about 1.1075, which is the lower trading level since December 26th. Although better-than-expected data from the German economy support good sentiment, it is likely that only Friday's PMI readings will have a stronger effect on the euro if they also exceed the market expectations.

Optimism of enterprises in the Islands is the highest since 2014

In turn, the Polish currency remains within a limited fluctuation range. The zloty is supported by continued positive market sentiment and small fluctuations of the main currency pairs. The EUR/PLN exchange rate continues to fluctuate around 4.23-4.24 and USD/PLN around 3.81-3.83. A slightly higher reaction was observed for the GBP/PLN pair, whose exchange rate exceeded 5.00 PLN for the first time since January 10th. However, this is a result of the global appreciation of the pound following the better-than-expected data from the British economy, which slightly reduced the Bank of England's expectations for interest rate cuts at the end of January.

After yesterday's data from the British labour market, which exceeded the consensus, the CBI's survey data on British companies came as a positive surprise today. The trend of new orders turned out to be slightly higher than expectations (minus 22 against a consensus of minus 25), but especially in January companies' optimism increased strongly. It rose to its highest level since 2014, far above expectations (23 points against the minus 20 consensus). A moment in the afternoon, the GBP/USD exchange rate rose by about 0.4% to 1.31. At the same time, the probability of cutting interest rates by 25 basis points at the end of January (based on swap indexes) fell to about 50%, i.e. by about 23 percentage points below the level at the end of last week, which increased pressure on the British currency.

22 Jan 2020 13:19|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:

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