Sentiment improves (Afternoon analysis 22.02.2018)

The EUR/USD pair exceeded the 1.2300 level. Higher quotations of the main currency pair are mainly due to the improvement of market sentiment rather than the minutes from the ECB. The zloty remained relatively weak taking recent quotations into account, but, if the US session was positive, the pressure on the zloty should decline.

Sentiment on the main currency pair changed unexpectedly around 3.00 p.m. It seems that this was caused by the growth of S&P futures contracts and not due to the minutes' publication.

ECB's minutes

The main event of this afternoon was the publication of minutes after the ECB meeting less than a month ago. However, the message from the European monetary authorities was much less clear than their US counterparts.

The issue (discussed above) of omitting the part of the possibility of further relaxation of monetary policy by broadening the bond-buying program was important. The broadening of the program is, of course, very unlikely at this point, but leaving the "gate open" by the ECB is perceived as a dovish signal.

Generally, it was determined that the "gate" would remain open, although opinions materialized and questioned whether it should be closed. The ECB has raised discussion on the issue of the foreign exchange market. The last meeting took place during the summit in Davos, where the US officials commented on what the market perceived as negative for the dollar.

Euro volatility was also discussed. A higher euro valuation may make it more difficult for inflation to reach the target, but there were no other significant references apart from these suggestions. The euro valuation is partially connected to the behaviour of other currencies (the issue of Davos and the weaker dollar). The ECB statement was rather neutral for the EUR/USD pair.

Sentiment on the market is important for both EUR/USD and the zloty. The Polish currency is mainly determined by the US behaviour. The first minutes of the New York session are optimistic, which not only increases EUR/USD but also strengthens the zloty.

However, the end of the US session is a mystery. If optimism is not maintained until the end of the session then the EUR/USD pair can quickly return to today's lows. On the other hand, if the US closure would be clearly advantageous, then the zloty could pare some losses.