Zloty may incur losses (Afternoon analysis 18.10.2018)

There was no strong growth of the US currency; the EUR/USD quotations oscillate around 1.15. However, a clear drop below this level may weaken the zloty and lead to the return of EUR/PLN quotations above 4.30.

Polish currency under pressure?

Thursday was relatively calm in the currency market. The dollar remained stronger after yesterday's publication of minutes from the last Federal Reserve meeting. Although the dollar index (DXY), which measures its value in relation to the six basic currencies, rose to 95.5 points, the highest level since October 9th, the scale of change was limited. The EUR/USD quotations were still at a level of 1.15.

Weekly data from the US labour market changed slightly. The number of initial jobless claims turned out to be 1,000 lower than expected and amounted to 210,000. The number of insured unemployment also dropped to 1.64 million. This is the lowest level since August 1973 and 15 thousand lower than the median of market expectations. This is another positive sign from the labour market in the USA, although the claims are close to the lowest levels in many decades and their impact on the dollar's quotations is limited.

No clear dollar appreciation and stabilisation of prices at the 1.15 limit helped the zloty which did not incur greater losses due to weaker data from the Polish economy. The changes were limited to about 0.2% in relation to the main currencies, but a gradual decrease in the zloty's basket could be observed. The EUR/PLN quotations systematically increased from 4.29 at the beginning of the day to 4.30 at around 4.30 p.m. The zloty's condition will depend mostly on the EUR/USD quotations in the following hours. If we observe a deeper decline of its exchange rate below 1.15, it may also cause supply pressure on the zloty.

Tomorrow's preview

At 10:00 a.m., the Polish Central Statistical Office (GUS) will present data on retail sales in Poland for September. The median of market expectations indicates its growth by 7.6% a year, compared to 9.0% a month ago. This data may turn out to be crucial for the Polish zloty, as this week all important publications of macro data from the Polish economy disappointed market expectations. Another set of worse than expected data may strengthen the argument that Poland's growth should be cooled down and, as a result, weaken the zloty at the end of the week, especially if we observe a strengthening of the dollar at the same time.