Zloty pares some losses (Daily analysis 20.07.2018)

A weaker dollar and lower interest rates seem to have been more preferred by the US President and the dollar depreciating somewhat. This helps the zloty, which received positive data regarding the fastest retail sales growth in June in Poland in nearly 1.5 years.

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 impact the analyzed currency pairs.

Trump bothered with strong dollar

The event of yesterday evening was most probably the comment made by the US President, Donald Trump, on the dollar. When a gradual appreciation was observed, the Trump said (quoted by CNBC) that he would have preferred a weaker dollar with currently strong Chinese Yuan. He also raised the issue of rising interest rates in the USA, which creates a disadvantage for the country in relation to the eurozone or Japan, whose central banks maintain a very mild monetary policy.

Shortly afterwards, the White House spokeswoman confirmed that the President was "respecting the independence of the Federal Reserve," but that the damage to the dollar had already been done. Shortly after Trump's comments, the EUR/USD quotations rose from around 1.160 to 1.168. This morning, the main currency pair's rate oscillated around 1.165. Although the US President's statements caused some confusion in the USD quotations, in the end, all of the fluctuations were within the quotation range that we have seen in recent days. Therefore, it seems that this event, in the long run, will have little impact on the dollar's quotations, which should return to the upward trend relatively quickly.

Another set of weaker data from the eurozone seems to be helping in this respect. The current account surplus in the eurozone was only 22.4 billion EUR, 4.8 billion below market expectations. This is also the lowest level in more than two years. Given that the calendar of scheduled publications is empty for the rest of the day, this may increase the pressure on the euro within the next few hours.

The data from the Polish Central Statistical Office (GUS) regarding retail sales in Poland had a completely opposite effect. In June, it increased by 10.3% year-on-year, 2.4 percentage points above the median market expectations. This is the highest growth pace in nearly 1.5 years. The increase in fuel sales by 20.3% as compared to June last year is particularly important, although it is largely caused by higher oil prices (and consequently fuel prices at fuel stations). But this is not the only double-digit increase in sales.

Furniture, RTV and AGD sales increased by 15.1%, clothing and footwear sales by 12.2% per year and cosmetics and pharmaceuticals sales by 10.8%. It can be clearly seen that the improvement of the economic situation in Poland significantly supports the purchase of consumer goods, which, however, quickly lose their value. Moreover, wages in the enterprise sector increased by 7.5% in the corresponding period.

The zloty's strengthening was observed since the morning. Partly it was a rebound to the depreciation, partly a slightly weakened dollar after Donald Trump's comments. The GUS data may support this strengthening. In the early morning, the EUR/PLN quotations were above 4.35, while before 11:00 a.m. they dropped to around 4.323.

The zloty's quotations depend more on external factors, despite significantly better than expected data on retail sales, as was the case with data on industrial production and wages. If the dollar strengthened again, the zloty could incur some losses. No significant events or publications planned for today suggest that changes in both the dollar and the zloty in the following hours will be rather limited.