Zloty depreciates but still remains in good shape (Afternoon analysis 23.08.2018)

The dollar slightly stronger. The Polish currency in good shape, although it returns a smaller part of the profits earned in the previous days. The market may focus on tomorrow's speech by the President of the Federal Reserve at Jackson Hole.

EUR/USD tries 1.16 boundary

After the dollar's depreciation, it pared some of the recent losses. The EUR/USD quotations fell today to around 1.154, while yesterday afternoon they were above 1.162. The dollar's appreciation may be supported by mixed data from the eurozone (aggregated PMI for industrial and services sectors failed the market expectations) and again by solid data from the US labour market.

The number of initial jobless claims decreased by 2k to 210k last week and was 5k lower than the market consensus. This is the third week in a row when the number of claims has decreased and of almost 47-year records from a month ago (207k). The core scenario assumes a gradual return to around 1,15.

Given the stronger dollar, the relatively good condition of the zloty should be emphasized. Although the Polish currency was incurring some losses in relation to the main currencies, most of the increases of the previous days were maintained. This is partly due to the solid macro data that has recently been flowing from the internal market (industrial production, retail sales) and which continue to indicate a rapid pace of economic growth.

Before 4:00 p.m., August's preliminary PMI index data from the IHS Markit of the US industrial and services sector appeared today. In both cases, there was a marked decline - the former was the lowest since November 2017, and the latter was the lowest since April this year. Although the data weakened the dollar at the beginning (the EUR/USD pair reached 1.159), however, in the end, the data should have a limited impact on the currency. For the U.S. economy, the analogous indexes produced by ISM are more relevant.

Tomorrow's preview

At 2:30 p.m., the Census Bureau will publish data on the US durable goods in July, which can be used as a good reference for industrial production. A median of market expectations indicates an increase in orders by 0.5% per month, excluding transport orders. Given the current impact of political factors on the dollar, a reading in line or beyond the consensus would provide another argument for the dollar's appreciation, after yesterday's 'minutes' of the last FOMC meeting.

At 4:00 p.m., the Chairman of the Federal Reserve, Jerome Powell, will be speaking at a symposium in Jackson Hole. It is very difficult to expect it to have a dovish-like effect, given the current state of the US economy. Powell may bring up the issue of the independence of the Federal Reserve, which was one of the reasons for the fall in the dollar. Overall, Friday's speech by Powell should be favourable to the US currency, which is likely to end the week in a better shape than it is today (if there are no major unexpected political developments in the meantime).