Stable situation helps zloty (Daily analysis 19.02.2018)

Stabilisation is achieved without US influence. The eurozone maintained a high current account surplus which may help the euro. Important data will be published in subsequent days. The stable situation helped the zloty. The EUR/PLN fell below the 4.15 boundary in the morning.

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

• A lack of macro data may noticeably affect the analyzed currency pairs.

Sentiment cooled down

On Friday, the dollar clearly appreciated. The EUR/USD fell below the 1.2400. At the beginning, it was perceived as a result of slightly worse sentiment on the global market before the US session opening. However, although the US session turned out to be a relatively calm session, the dollar did not incur losses during today's trading in Europe. Does this mean that there are any significant changes in trends?

Currently, it seems that the dollar will remain weak. The dependence (weak sentiment - strong dollar) will be maintained. As sentiment has been recently improving rather than worsening (despite the weak data from the USA) the dollar is likely to remain under pressure and the events on Friday's situation on the market was rather a disturbance of recent correlations.

The continued high current account surplus of the eurozone (C/A) may be a threat to the dollar (and the euro may be supported due to it). Today, Eurostat published data presenting that the single currency area had a positive C/A balance of 391 billion EUR (3.5% of GDP) in 2017. Although this result is mainly due to Germany's substantial trade surplus (around 232 billion EUR according to Destatis), it is fundamentally supporting the euro.

What is interesting is that a stronger euro does not reduce the positive C/A balance, suggesting that a stronger currency does not prevent the eurozone from maintaining a competitive advantage over its trading partners. Therefore, it may also provide further support for the euro.

In the case of the US, the market has started to be concerned about the current account and budget deficit. This information is well-known but at times the market likes to "focus on" issues that are usually ignored. As a result, despite the favourable interest rate disparity between the dollar and the euro area, trade issues in the context of currencies may attract slightly more attention than usual.

Zloty remained strong

The calm start to the week and the lack of concerns about the US session (US markets are closed today) clearly helps the zloty. The EUR/PLN fell below the 4.15 boundary. The zloty is also strong in relation to the forint. The PLN/HUF pair appreciated above 75.00, which means that we are closing in on the highest levels in more than two years.

In the following days, a set of important macroeconomic data is planned to be published both from the country (industrial production, retail sales) and from the world (PMI, IFO). Moreover, the most recent ECB and Fed meeting’s minutes are expected. Perhaps, it may turn out that the movements on currencies are generated mainly by traditional impulses, and not only by sentiment on the market as this took place from the beginning of February.

The zloty should not be at particular risk in this situation. Macroeconomic readings from the country are mostly good. The main risk element is a sudden deterioration in global sentiment rather than slightly worse data from the global economy.