Today is calm, but tomorrow it may change due to important data (Afternoon analysis 20.01.2020)

Dollar is slightly stronger, zloty is slightly weaker. The global strength of the franc keeps the CHF/PLN pair at its highest levels since October. However, the low volatility of Monday's quotations is not a sign of a calm week. Tomorrow the situation may change.

Dollar closer to euro

Monday was marked by limited fluctuations, although the general trend supports the dollar. The US currency strengthened against most major currencies. These were not significant changes, but the EUR/USD exchange rate tested the 1.08 boundary in the afternoon. A fall below this level could potentially open the way for further declines, which depends, among other things, on the composition of the eurozone data, which we will learn later in the week.

Volatility and trading volumes were lower this afternoon than usual due to the US trade-free day. However, greater fluctuations will most likely return tomorrow, when the first relevant data in the form of the ZEW economists' sentiment index will be published.

Slightly stronger dollar put pressure on the zloty today, but changes were limited. The Polish currency's quotations also moved in a relatively narrow range, the EUR/PLN exchange rate was closed in approx. 4.237-4.246. On the other hand, the CHF/PLN exchange rate remains at relatively high levels, with the quotation of approx. 3.95 being constantly in the upper range of fluctuations since the first week of October last year.

This is because of the globally stronger franc. The EUR/CHF quotations still remain just below the lows from April 2017. An empty calendar of macroeconomic events supports the stabilization of the zloty around current levels until the end of the day. This will probably not be the scenario that will be valid later in the week. Significant data from the UK and the eurozone may extend the range of the zloty's quotations in relation to the main currencies on the following days.

Tomorrow's preview

At 10:30 a.m., the Polish Central Statistical Office (GUS) will publish data on the change in the average salary and employment in the Polish corporate sector as well as production in the construction sector in December. The market consensus indicates a 6.1% annual increase in wages, 2.6% in employment and 1.0% in construction production. Recent macroeconomic data support the zloty, building a positive picture of the Polish economy. However, the zloty reacts mainly to external factors and the direct response is likely to be limited, although the data may support the argument that the end of the year was stronger than expected in the Polish economy.

At 10:30 a.m., the Office of National Statistics (ONS) will publish data from the UK labour market. Focus will be on data on the average change in weekly wages. The median of market expectations indicates its increase by 3.1% year-on-year in November, by 3.4% excluding bonuses. In both cases, it would mean a 0.1 percentage point decline in growth. The November CPI data turned out to be clearly below expectations, which was one of the factors increasing expectations for a 25-basis-point cut in interest rates in the Islands already at the end of January. Lower wage pressures on inflation could support this argument, increasing somewhat the supply pressure on the pound. However, wages are only one of the readings from the British economy this week. On Wednesday, retail sales data will be released, and on Friday the PMI indexes will be published. Therefore stronger volatility can only be observed at the end of the week when the market will have a slightly more complete picture of the state of the British economy.

At 11:00 a.m., the ZEW institute will provide the data of an economists' January sentiment index for the German economy. The market consensus indicates a reading of minus 13.5 points, 6.4 points above the December level. A positive reading by ZEW could be an injection of optimism into the economy and support the euro, which has depreciated a little in recent days, including in relation to the dollar and the franc. The zloty basket, which has weakened due to the dollar's appreciation, could also benefit from this.