Stabilisation on the market (Afternoon analysis 23.02.2018)

No significant changes on the market translates into improving zloty condition, but the movements are small. The increases in the dollar's value are also limited. Calmness on the market is likely to be maintained during the evening session.

Dollar and zloty slightly stronger

The currency market was relatively calm today. This was mainly due to the absence of significant publications (the only potentially significant publications were on inflation in the eurozone and German GDP, but these were the next readings previously known data) and minor changes in the market. The dollar was in a slightly better condition today - the EUR/USD quotations oscillated around 1.23 but the fluctuation range was small (1.228 - 1.233).

Stabilization helps the Polish currency. The zloty basket appreciated today, although it was not a significant increase. Today, the EUR/PLN exchange rate moved from 4.18 to 4.17, and the USD/PLN rate fell slightly below 3.39 PLN, even though yesterday it amounted to 3.41 PLN.

During these few trading hours, zloty quotations will largely depend on the changes in the dollar's value and the behaviour of the US market. The events scheduled for the afternoon are likely to have a very limited impact on the evening quotations. Therefore, the value of the zloty in relation to the main currencies should rather remain in the range of current levels.

Zloty valuation could be worsened by drops on the US market and a growing dollar. However, the chances for dollar appreciation are limited today. The yields on the US government bond rebound from recent increases and investors’ attention may already be focussed on next week's events.

Next week’s preview

The most important publication of next week will probably be released at the end of the week. On Thursday, January's PCE inflation for the US economy will be published (this inflation is taken into account by the Federal Reserve in its projections). Although the consumer inflation (CPI) for January is already known, PCE data may still cause a significant movement in the currency market.

Market's attention will focus mainly on core index reading (excluding energy and food prices). Deviation from the consensus (1.5% per year) by as much as 0.1 percentage points per year may cause significant fluctuations in the dollar. An increase above the median of market expectations would mean the highest value since April 2017 and could result in a significant dollar appreciation, which could also have a negative impact on the entire zloty basket.